SCHN 2018 Proxy Statement

Compensation Discussion and Analysis Overview This Compensation Discussion and Analysis provides a detailed description of our executive compensation philosophy and programs, the decisions that the Compensation Committee (the “Committee”) of the Board of Directors (the “Board”) have made under those programs, and the factors considered in those decisions. This Compensation Discussion and Analysis focuses on the compensation of our NEOs for fiscal 2018 disclosed in the tables under the “Compensation of Executive Officers” section of this proxy statement. The NEOs for fiscal 2018 are listed below. Name Title Tamara L. Lundgren President and Chief Executive Officer (“CEO”) Richard D. Peach Senior Vice President, Chief Financial Officer and Chief of Corporate Operations (“CFO”) Michael R. Henderson Senior Vice President and Co-President, Auto and Metals Recycling and Cascade Steel and Scrap Steven G. Heiskell Senior Vice President and Co-President, Auto and Metals Recycling Jeffrey Dyck Senior Vice President and Co-President, Cascade Steel and Scrap Consideration of 2018 Say-on-Pay Vote and Shareholder Outreach The Compensation Committee seeks to align the Company’s executive compensation program with the interests of the Company’s shareholders. On an annual basis the compensation of our NEOs, as disclosed in our annual proxy statement, is submitted to our shareholders for a non-binding advisory vote (“Say-on-Pay”). At our 2018 annual meeting, approximately 65% of the votes cast were in favor of the advisory resolution to approve our executive compensation program. This level of support was a significant decline from the 2017 and 2016 Say-on-Pay votes, when 96% of the votes cast were in favor of this proposal in each year. In order to gain a better understanding of any shareholder concerns and to identify areas for improvement within our executive compensation programs, we began a process four years ago to pro-actively reach out to our investors. Since 2015, we have had discussions, either by phone or in person, with shareholders representing more than half of our outstanding shares. These discussions have involved both the Chair of the Compensation Committee and either the Chairman of the Board of Directors or our Lead Independent Director. During 2018, we pro-actively reached out to investors holding approximately two-thirds of our outstanding shares, and had discussions with investors holding nearly 15% of outstanding shares. Prior to our 2018 annual meeting, the proxy advisory firm, Institutional Shareholder Services (“ISS”), issued a negative vote recommendation in connection with our Say-on-Pay proposal. As a basis for its recommendation, ISS cited that while the Company had not materially extended nor amended the CEO’s change-in-control agreement, the Company should have removed the legacy excise tax gross-up provision from the change-in-control agreement when the Company amended the CEO’s employment agreement in connection with a $100,000 increase in base salary in July 2017. This 10% salary increase was the first increase in the CEO’s base salary in over six years, reflecting the adverse market conditions during that period. Because the CEO’s employment agreement provides for annual review and periodic increase of the CEO’s base salary, the Company did not consider this to be a material amendment. While none of the investors we had discussions with in 2018 indicated that the excise tax gross-up issue resulted in a vote against our Say-on-Pay proposal, we are mindful of the ISS position and are committed to the Company’s policy in place since 2008 that such excise tax gross-up provisions will not be included in any new or modified change-in-control agreements going forward. Continuing a trend that began two years ago, this year there was a limited number of investors requesting a meeting which we attribute primarily to the Company’s continued strong performance and satisfaction with the changes made in response to the shareholder input received in recent years, including the significant changes made to our executive compensation program beginning in fiscal 2016 and the improved readability and transparency of our proxy statement beginning with the proxy for fiscal 2015. Discussions with investors and shareholder Say-on-Pay voting are key drivers in our compensation design to continue alignment between our compensation programs and the interests of shareholders. Notice of Annual Meeting of Shareholders and 2018 Proxy Statement | 31