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                                                                   EXHIBIT 10(g)

                             DIRECTOR COMPENSATION
 
ANNUAL RETAINER AND ATTENDANCE FEES
 
       For 1998, each ITW director received a $25,000 annual retainer and $1,000
for each Board meeting or committee meeting he or she attended. Committee
chairmen received an additional $600 for each committee meeting they chaired.
For 1999, the retainer is $35,000, the fee for each Board or committee meeting
is $1,500, and the fee for chairmen is an additional $900 per meeting chaired.
As of 1999, non-officer directors can elect to receive some or all of their
retainer and fees in an equivalent value of ITW common stock. In addition, under
our deferred fee plan, a director can defer receipt of all or part of cash fees
until he or she is no longer a director. Deferred amounts are credited with
interest at current rates.
 
RESTRICTED ITW COMMON STOCK
 
       A portion of director compensation includes the periodic grant of
restricted ITW common stock, which directly links an element of director
compensation with stockholder interests. In January 1998, each non-officer
director of ITW received an award of 900 restricted shares. These shares vest
equally over three years and fully vest upon the director's death or retirement.
Each new non-officer director who joins the Board will be granted an award of
300 shares for each full year of service remaining until January 2001. These
shares will vest equally over the years remaining until January 2001 and fully
vest upon death or retirement. A director cannot sell the shares until the
earliest of retirement, death or January 2001. A director who terminates other
than for death or retirement prior to January 2001 will forfeit any unvested
restricted shares.
 
PHANTOM ITW STOCK
 
       To tie a further portion of their compensation to stockholder interests,
non-officer directors of ITW are granted 1,000 units of phantom stock upon
becoming a director. The value of each unit equals the market value of one share
of ITW common stock. Additional units are credited to a director's phantom stock
account in an amount equivalent to cash dividends paid on ITW stock. Accounts
are adjusted for stock dividends, stock splits, combinations or similar

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changes. A director is eligible for a cash distribution from his or her account
at retirement or upon approved resignation. When phantom stock is granted,
directors elect to receive the distribution in either a lump sum or in up to ten
annual installments. Directors may change this election at any time until two
years preceding the distribution. Directors receive the value of their phantom
stock account immediately upon a change of control.
 
OTHER ARRANGEMENTS WITH DIRECTORS
 
       Harold B. Smith has a one-year agreement with ITW to provide consulting
services for a fee of $85,000.
 
 
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