SCHN 2017 Proxy Statement

Compensation Discussion and Analysis Components of Compensation Base Salary . Base salaries paid to NEOs are intended to attract and retain highly talented individuals. The Committee reviews the base salaries of our NEOs on an annual basis. Base salaries for NEOs are established on the basis of their individual performance and relevant business skills, scope of duties, and sustained contributions to our success, as well as competitive information as to similar positions in other relevant companies, taking into consideration relative company size and geographic location. In July 2017, the Committee increased Ms. Lundgren’s annual base salary to $1,100,000, which was a 10% increase and placed her base salary at the overall level the Committee deemed appropriate in light of her performance and responsibilities as the CEO. In setting her salary, the Committee considered the recommendations of its independent compensation consultant, information regarding the compensation levels in the companies in the compensation peer group, her role and responsibilities as CEO, and the Company’s performance during fiscal 2017. The Committee also took into account that the annual base salary of the CEO had not been increased since May 1, 2011. Effective November 2016, the Committee approved salary adjustments for the other NEOs ranging from 2.5% to 3.8%. Annual Incentive Programs . The Committee approves annual performance-based compensation under the CEO’s employment agreement and, for the other NEOs, under the AICP, as described below. A target bonus, expressed as a percentage of either base salary as of the end of the fiscal year or base salary paid during the fiscal year, is established for each NEO. The CEO’s fiscal 2017 target bonus percentage was established in the June 2011 amendment to her employment agreement (see “Employment Agreements”). For other NEOs, the Committee annually reviews the target bonus percentages and approves any adjustments, which generally take effect immediately and apply on a pro-rated basis to bonuses payable for the current fiscal year. Annual Performance Bonus Program for the CEO. The employment agreement between the Company and the CEO provides for an annual bonus program consisting of two parts: a bonus based on achievement of Company financial performance goals and a bonus based on achievement of management objectives, each of which comprise 50% of the total bonus. The total target bonus opportunity under both components for each fiscal year is stated in her employment agreement to be 150% of her base salary as of the fiscal year-end, with half of the total target bonus allocated to each part. The CEO’s employment agreement also provides that the maximum bonus payment is 3x target. The CEO’s target bonus percentage and maximum bonus percentage have remained unchanged since May 2011. For the first part of the CEO’s annual bonus program which is based on Company financial performance, and similar to fiscal 2016, the Committee established Adjusted EPS as the sole metric for the financial performance component of the CEO’s fiscal 2017 annual bonus program. The second part of the CEO’s annual bonus program is based on the achievement of management objectives established by the Committee. As part of its annual process, the Committee selects key objectives, the successful completion of which it believes will tie most closely to the achievement of the Company’s strategic objectives and be linked to the creation of long-term shareholder value. While the Committee believes that maintaining consistency in the objectives established from year-to-year is important, it makes changes as warranted by the Company’s strategic priorities and the overall market environment. The Committee established four management objectives for fiscal 2017: • Improvement in our workplace safety as measured by OSHA safety metrics, reflecting our ongoing, multi-year focus in this area. • Achievement of cost savings as measured by the reported benefits achieved in fiscal 2017 from our publicly announced cost savings and productivity initiatives. • Achieving operating cash flow targets as a reflection of improved working capital management and profitability. • Executing certain strategic objectives, including optimizing the Company’s operating platform, efficient use of capital, enhancing organizational structure and management development, volume growth, and increasing operating margins. The Committee determined that these represent important strategic objectives for our business platform, and the focus on these metrics in the CEO’s fiscal 2017 annual bonus program reflects the vital role the CEO’s leadership plays in ensuring execution of the Company’s strategic plan. Measurement of the achievement of these strategic objectives by the Committee is based on the annual performance evaluation of the CEO and on quantitative factors with respect to the metrics relating to volume growth, operating margin, and capital. The Committee chose these management objectives since they considered achievement of such goals as critical to both the immediate and long-term profitability of the Company. In particular, they assigned a weighting of 40% of the management objectives component of the CEO’s annual bonus performance program (overall APBP weighting of 20%) to the strategic objectives because they viewed achievement of those objectives as not only benefiting fiscal 2017 earnings Notice of Annual Meeting of Shareholders and 2017 Proxy Statement | 43