SCHN 2018 Proxy Statement

Compensation Discussion and Analysis 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 – More than 80% of the target compensation for the CEO and approximately 70% 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 2018 Annual Performance Bonus Program (“APBP”) metrics were linked to earnings per share (“EPS”), safety performance, productivity improvements, operating cash flow, and strategic objectives. – For NEOs other than the CEO, the fiscal 2018 Annual Incentive Compensation Plan (“AICP”) metrics were linked to EPS, safety performance, productivity improvements, and operating cash flow. – For NEOs, including the CEO, the non-income statement metrics (i.e., safety performance, productivity improvements, and operating cash flow) were capped in fiscal 2018 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 2018, the metrics are based 50% on relative TSR and 50% on ROCE. – 50% of the long-term equity awards are time-vested RSUs which 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. – For fiscal 2018, the annual incentive plans for the CEO and other NEOs included a bonus modifier based on corporate performance measures and target goals that were designed to drive profitable growth and achieve strategic objectives. The targets for the bonus modifier were intended to be “stretch” goals that could not be easily achieved. – 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. • Peer group appropriateness – Beginning with fiscal 2016, the process for selecting the Company’s compensation peer group was changed to identify a mix of companies which the Committee believes provides a more comparable aggregate benchmark. Quantitative and qualitative criteria were applied to better reflect current market capitalization and revenue parameters and to expand the qualitative assessment of potential compensation peers to focus on position in the value chain and exposure to international markets. – Our benchmarking compensation peer group includes 13 companies that the Committee believes reflect appropriate industry, size, geographic scope, and market dynamics. • No reloading, re-pricing, or backdating of stock options • Stock ownership and retention requirements – We have adopted stock ownership guidelines to promote long-term alignment of the interests of our shareholders and our officers, as discussed on page 51. – Once officers achieve compliance, they must also retain at least 50% of shares that vest thereafter for at least three years. • Double-trigger for cash severance payments and benefits in change-in-control agreements – Our change-in-control agreements are double trigger, i.e., a change in control plus termination of the executive’s employment by the successor company without cause or by the executive for good reason is required to trigger cash severance payments and benefits. – No excise tax gross-ups in any new or modified change-in-control agreements going forward. • Risk mitigation measures – We use a mix of annual and long-term incentive awards and overlapping performance periods to drive current performance in light of long-term objectives. 34 | Notice of Annual Meeting of Shareholders and 2018 Proxy Statement