SCHN 2017 Proxy Statement

Compensation Discussion and Analysis Initiatives: Delivering Operational and Economic Benefits to Increase Long-Term Shareholder Value Initiative Fiscal 2017 Results Increase volumes Delivered higher ferrous and nonferrous volumes through a combination of expanding supply channels, further diversifying sales, and improved market conditions Expand operating margins Expanded operating margins through ferrous and nonferrous volume growth and sustained benefits from cost reduction and productivity initiatives Operating cash flow Generated $100 million in operating cash flow through increased profitability enabling us to continue to invest in the Company, reduce debt by 25%, and return capital to our shareholders through our quarterly dividend Cost savings and productivity initiatives Realized approximately $18 million in incremental annual operating performance improvements from cost savings and productivity initiatives, which completed the targeted $95 million in annual benefits related to these measures announced since fiscal 2015 CSS integration Completed CSS integration of steel mill and Oregon metals recycling operations and invested in a major equipment upgrade aimed at increasing productivity and enhancing product quality Summary of our Executive Compensation Program Set forth below is a summary of our executive compensation practices. • We seek and carefully consider shareholder feedback regarding our compensation practices • We link our executive compensation to our performance – 83% of the target compensation for the CEO and 69% of the target compensation for the NEOs other than the CEO are “at-risk”. – We select metrics in our short-term annual incentive plans that are expected to drive long-term shareholder value, and metrics in our long-term incentive plan that are intended to reflect creation of shareholder value. – For the CEO, the fiscal 2017 Annual Performance Bonus Program (“APBP”) metrics were linked to earnings per share (“EPS”), safety performance, cost savings, operating cash flow, and strategic objectives. – For NEOs other than the CEO, the fiscal 2017 Annual Incentive Compensation Plan (“AICP”) metrics were linked to EPS, safety performance, cost savings, and operating cash flow. – For NEOs, including the CEO, the non-income statement metrics (i.e., safety performance, cost savings, and operating cash flow) were capped in fiscal 2017 at 0.5x in the event adjusted earnings per share were negative. – 50% of the long-term equity awards are performance share awards that vest following the end of a three-year performance period based on Company performance during the period. For performance share awards granted in fiscal 2017, the metrics are based 50% on relative TSR and 50% on CFROI. – No performance shares vested in fiscal 2017 as a result of the transition to a three-year performance period for performance share plans. – 50% of the long-term equity awards are time-vested RSUs which generally vest ratably over a five-year time period, are intended to incentivize executives to create shareholder value through stock price appreciation, and provide a retention incentive. – Fiscal 2017 compensation also included the second half of the one-year PIBP established by the Committee in order to incentivize the execution of $30 million in critical new cost savings and productivity initiatives launched in response to significantly weakened market conditions in the first half of fiscal 2016. The PIBP performance period commenced in the second half of 2016 and continued through the first half of fiscal 2017. The PIBP included a “gateway” mechanism with no credit for any quarter in which we reported an adjusted loss per share and a retention component with no payout for the CEO and other NEOs until after the end of such 12-month period. Because we experienced an adjusted loss per share in the first quarter of fiscal 2017, the CEO and other NEOs did not receive credit for the first three months of the fiscal 2017 PIBP performance period. As a result, the overall PIBP payout for the NEOs, including the CEO, for amounts earned in fiscal 2017 was equivalent to 0.5x of the PIBP target (equal to approximately 0.1x of the participant’s AICP/APBP target) and totaled less than $300,000 for all NEOs, including the CEO, combined. – Metrics and targets for incentive plans are based on the Company’s strategic and business plans and annual budgets that are reviewed by the full Board and are analyzed and tested for reasonableness before Committee approval at the beginning of the performance period. The Committee actively evaluates the appropriateness of the financial measures used in incentive plans and the degree of difficulty in achieving specific performance targets. Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | 33