COMPENSATION DISCUSSION AND ANALYSIS

WD-40 Company’s Compensation Discussion and Analysis addresses the processes and decisions of the Company’s Board of Directors and the Compensation Committee of the Company’s Board of Directors (the “Committee”) with respect to the compensation of the Named Executive Officers (“NEOs”) referred to in the Summary Compensation Table appearing on page 25 of this proxy statement.

Governance of Executive Officer Compensation Program

The purpose of the Committee is to assist the Board with compensation- and benefits-related issues related to the Chief Executive Officer (CEO) and the other NEOs. The Committee engages Compensia, Inc. as their outside, independent compensation consultant. The Committee is responsible for establishing the Company’s overall compensation strategy, with support from management and consultants. The Committee also has responsibilities in connection with administration of the Company’s equity compensation plans.

With respect to compensation of the NEOs for fiscal year 2008, the Committee had the following responsibilities:

The Compensation Committee acts according to its Charter, a copy of which can be found under the Officers and Directors link on the Investors page of the Company’s website — at http://www.wd40company.com. In December 2007, the Committee’s Charter was revised to provide for full delegation of authority to the Committee with respect to the recommendation and approval of the annual compensation package for the CEO. Decisions with respect to the CEO’s compensation for fiscal year 2009 were made by the Committee.

Process for Evaluating Executive Officer Performance and Compensation

In accord with its Charter, the Compensation Committee works with the Company’s Human Resources function in carrying out its responsibilities; the Vice President of Human Resources is management’s liaison with the Committee. During fiscal year 2008, the Committee engaged Compensia, Inc, an independent compensation advisor, to provide advice and information relating to executive compensation. Compensia assisted the Committee in the evaluation of executive base salary, bonus compensation and equity incentive design and award levels. Compensia reports directly to the Committee and provides no additional services for management.

Executive Compensation Philosophy and Framework

Compensation Objectives

The Company’s executive compensation program is designed to achieve four primary objectives:

  1. Attract and retain high-caliber executives.
  2. Align the interests and compensation of executives with the value created for shareholders.
  3. Reinforce a sense of urgency among executives to achieve both short-term and long-term Company objectives.
  4. Create a direct, meaningful link between business and team success and individual performance and rewards.

Target Pay Position/Mix of Pay

The Company’s compensation program consists of base salary, annual cash incentives, and long-term oriented equity grants. Each of these components is discussed in greater detail below under the heading, “Executive Officer Compensation Decisions.” The Compensation Committee has established a target for executive officer total compensation at the 50th percentile, relative to the market (details on the benchmarking peer group are provided below). Actual pay may vary, based on an individual’s performance, length of time within the position, and anticipated contribution. With respect to equity, the Committee has managed stock option grants and equity awards to an annual utilization or “burn” rate. The “burn” rate represents a percentage of the Company’s total outstanding shares used during the current year for compensation purposes. The Committee allocates stock options or equity awards to individuals based on the Company’s retention goals, the criticality of the role of each plan participant and the individual’s contribution to the Company’s performance. Fiscal year 2008 stock option grants to the Company’s NEOs (including the CEO) were between the 25th and 50th percentile of the market based on the value of such options as determined for financial reporting purposes and as compared to equity grants of companies falling within a broad industry set of companies having revenues comparable to WD-40 Company as further discussed in the next section.

Compensation Benchmarking

For fiscal year 2008 compensation decisions, the Compensation Committee examined the executive compensation practices of a peer group of twenty-one companies to assess the competitiveness of the Company’s executive compensation. Peer group companies were selected from a list of U.S. headquartered companies having revenues reasonably comparable to WD-40 Company and doing business in the specialty chemical industry or within specific consumer products categories. In addition to the peer group data, the Committee has used broad industry company data from published compensation surveys for a set of companies having revenues comparable to the Company. This mix of data has been weighted, 50% for the broad industry company data and 50% for the peer group data. The peer group is comprised of the following companies:

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