2018 Guide to Effective Proxies

2.17.7 Alternative pay calculations | 415 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES SCHNITZER STEEL INDUSTRIES, INC. SUNCOKE ENERGY, INC. SUPERIOR ENERGY SERVICES, INC. TEGNA, INC. ProxySummary Fiscal 2017 Compensation Summary Our fiscal 2017 compensation program links pay to performance.Asaresultofthislinkageofpaytoperformance, actual compensation in fiscal 2017 was higher than target levels, except with respect to the Performance Improvement BonusPlan(“PIBP”),asrepresentedbythefollowing: • Aligned with our strong performance in fiscal 2017, the fiscal 2017 Annual Performance Bonus Program (“APBP”) paid out at 2.35x of target for the CEO and the fiscal2017AnnualIncentiveCompensationPlan(“AICP”) paid out for the other NEOs at either 1.55x or 1.56x of target • Fiscal 2017 compensation also included the second half of the one-year PIBP established by the Compensation Committee in order to incentivize the execution of $30 million in critical new cost savings and productivity initiatives launched in response to significantly weakened marketconditionsinthefirsthalfoffiscal2016.ThePIBP performance period commenced in the second half of 2016 and continued through the first half of fiscal 2017. ThePIBPincludeda“gateway”mechanismwithnocredit for any quarter in which we reported an adjusted loss per share and a retention component with no payout for the CEOandotherNEOsuntilaftertheendofsuch12-month period. Because we experienced an adjusted loss per shareinthefirstquarteroffiscal2017,theCEOandother 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 $300,000forallNEOs,includingtheCEO,combined. • Noperformancesharesvestedinfiscal2017asaresultof the transition to a three-year performance period for performanceshareplans. • Realizable pay on average over the past three years as compared to total compensation reported in the summary compensation table, as described below, was 79% for the CEOand72%fortheotherNEOs • 10% increase in the base salary for the CEO effective July 2017,thefirstbasesalaryincreasefortheCEOsinceMay 2011 Fiscal 2017 Executive Compensation Program At-A-Glance Program (1) Purpose RelevantPerformanceMetrics Annual BaseSalary CEO:17% OtherNEOs:31% Toprovideacompetitivefoundationand fixedrateofpayforthepositionand associatedlevelofresponsibility NotApplicable AnnualIncentive CEO:27% OtherNEOs:23% Toincentivizeachievementofoperating, financial,andmanagementgoals EPS(50%–55%) SafetyPerformance (2) CostSavings OperatingCashFlow StrategicObjectives(CEO) PerformanceImprovements (3) LongTerm RestrictedStockUnits CEO:28% OtherNEOs:23% TofocusNEOsonlong-termshareholder valuecreationandpromoteretention Absolutesharepriceappreciation PerformanceShareAwards CEO:28% OtherNEOs:23% TofocusNEOsonachievementof financialgoalsandlong-termshareholder valuecreation RelativeTotalShareholderReturn(TSR) (50%) CashFlowReturnonInvestment(CFROI) (50%) (1) Representsapercentageoftotaltargetedcompensation. (2) LostTimeIncidentRate(“LTIR”);TotalCaseIncidentRate(“TCIR”);andDaysAway,RestrictedorTransferredRate(“DART”) (3) Separateone-yearPIBPforthe12-monthperiodendingFebruary28,2017describedbelowunder“ComponentsofCompensation—Performance ImprovementBonusPlan”. Linking Pay to Performance Topromoteaperformance-basedculturethatalignstheinterestsofmanagementandshareholders,ourexecutivecompensation program focuses extensively on performance-based and equity-based compensation. As illustrated in the charts below, the substantial majority of our NEOs’ target compensation in fiscal 2017 was in the form of “at-risk” compensation (short-term and NoticeofAnnualMeetingofShareholdersand2017ProxyStatement | 11 Total of 03 pages in section CEO Transition Mr. Henderson elected to retire from the Company on December 31, 2017. Michael G. Rippey was appointed by the Board of Directors as President and CEO effective December 1, 2017. To provide for a smooth transition, Mr. Henderson continued to serve as executive Chairman through December 31, 2017, at which time John W. Rowe, who was the Company’s lead director, assumed the role of non-executive Chairman. In connection with Mr. Rippey’s appointment, the following are the key elements of hisexecutivecompensation: • Baseannualsalary of $750,000. • Annual Incentive target under the Company’s Annual Incentive Plan of 100% of base annual salary. Mr. Rippeywasnot eligiblefor an annualincentivepayment related to 2017. • Mr. Rippey received a long-term incentive award for 2018 under the Company’s Long-term Performance Enhancement Plan of $2,000,000 on December 6, 2017. This award consisted of 80% performance share units and20% market stock options. Based on the employment terms negotiated with the Compensation Committee, Mr. Rippey’s total compensationat target for 2018willbe approximately78% of the 2017CEO targeted compensation. Mr. Henderson will receive an annual incentive bonus for 2017, and his equity will vest to the extent provided for by the provisions of the Long-term Performance Improvement Plan and prior grant agreements. Realizable Pay To put the Company’s performance-based linkage into perspective, it is important to consider not only targeted pay levels, but also the realizablepay for the executives at year-end and how this valuetracks with shareholder return over time. The chart below shows that the former CEO’s realizable pay tracks the trend of the shareholder return, and that it was significantly below his target pay in the two years where TSR experienced a significant decline, demonstrating the linkage between TSR and realizable pay. 2013 2014 2015 2017 2016 Five-YearCEOCompensa�onvs. IndexedTotalShareholderReturn $2,000 $3,000 $4,000 $5,000 $6,000 $7,000 $8,000 $200 CEOCompensation (in thousands) IndexedTotalShareholderReturn IndexedTSR (BaseYear 2011) Realizable Target $0 $1,000 $0 $50 $100 $150 $7,460 $5,704 $1,979 $5,704 $4,463 $4,962 $4,250 $4,514 $5,704 TSR EndPoint $81.89 $3,915 24 EXECUTIVECOMPENSATION ExecutiveSummary OUR CEO’S REALIZED PAY THROUGH 2017 COMPARES VERY FAVORABLY WITH OUR TOTAL SHAREHOLDER RETURN ThefollowingchartcomparesourCEO’sAdjustedSummaryCompensationTable(SCT)CompensationandRealizedPaybetween 2015and2017incomparisontoourcumulative3-yeartotalshareholderreturnrelativetoourPeerGroup.Thechartreflects Mr.Lougee’sAdjustedSCTcompensationandRealizedPayforcalendaryear2017andMs.Martore’sAdjustedSCTcompensation andRealizedPayforcalendaryears2016and2015. TheamountofpaypresentedforourCEOandtheotherNEOsintheSummaryCompensationTableincludesthegrantdatefairvalue oflong-termincentiveawardsforaccountingpurposes.BasedontheperformanceofoursharepriceandhowtheCompany’stotal shareholderreturncomparestothetotalshareholderreturnsofourPeerGroup,theamountofpayactuallyrealizedbyourNEOsfrom theseawardsmaydiffersignificantlyfromtheiraccountingvalue.Asaresult,webelieveitisusefultocompareourCEO’sRealizedPay between2015and2017withhisorherAdjustedSCTCompensationforthesameperiod.Forthispurpose,wedefine: • “AdjustedSCTCompensation”asthecompensationreportedintheSummaryCompensationTablefortheapplicable year,adjustedbyexcluding“ChangesinPensionValueandNonqualifiedDeferredCompensationEarnings”and“All OtherCompensation.”Weexcludedtheseitemsbecausetheyeitherrepresentamountsthatwillnotbecomerealizedpay untilterminationofemploymentorlaterorarenotpartofourcorecompensationprogram;and • “RealizedPay”asthesumof(i)actualbasesalaryandbonuspaidfortheapplicableyearplus(ii)theamountreportedin the“OptionExercisesandStockVested”tableuponthevestingofRSUsandPerformanceSharesorexerciseofstock options. $8.8 $8.3 $4.6 $9.1 $3.6 $0 $25 $50 $75 $100 $125 $150 $0 $4 $8 $12 $16 $20 $24 IndexedTotalShareholderReturn InMillions CEOPay SCTCompensation andRealizedPay 2015 2016 2017 AdjustedSCTCompensation RealizedPay 2017PeerGroupTSR TEGNATSR $14.7 OurCEO’sRealizedPaybetween2015and2017consistedof: 2015 ($) 2016 ($) 2017 ($) Basesalaryreceived 1,000,000 1,000,000 908,333 Bonus 2,750,000 2,250,000 1,000,000 Stockoptionexercises 2,385,596(1) 0 0 RSU/Performancesharevesting 8,564,245(2) 5,899,575(3) 1,643,212(4) Total* 14,699,841 9,149,575 3,551,545 (1) TheseamountsincludethevalueofGannettstockoptionsexercisedbyMs.Martorein2015afterthePublishingSpin-off. (2) TheseamountsincludethevalueofRSUsthatvestedonDecember31,2015thatweresettledinsharesofGannettstockandGannettshares acquiredbyMs.MartoreonFebruary1,2016inrespectofthepayoutofperformancesharesforthe2013—2015IncentivePeriod. 19 2018PROXYSTATEMENT CEOPaySCTCompensationandRealizedPay Total of 02 pages in section EXECUTIVECOMPENSATION Our CEO’s 2017 real pay was 68.6% of his 2017 target compensation opportunity. Our other NEOs’ average real pay was 72.8% of their 2017 target direct compensation opportunity. There was a similar result in 2016 when the corresponding amounts were 75% of target for our CEO and an average of 74.2% of target for our other NEOs. The graph below illustrates the relationship between our NEOs’ 2017 target compensation opportunity and real payin2017and2016. 0 10 20 30 40 50 60 70 80 90 100 Other NEOs (Average) CEO 2017 Target Compensation 2017 Real Pay 2016 Real Pay Real Pay YOY -31.4% -6.4% -27.2% -1.4% 2017 68.6% 2016 75% 2017 72.8% 2016 74.2% YOY CompensationBest Practices We strive to align executive compensation with stockholder interests, and to incorporate strong governance standards within our compensation program,suchas: ➢ 75% of Long-Term Incentives are Performance-Based – During 2017, we continued our emphasis on performance based compensationwith75%ofthegrantdatevalueof our long-term incentives being performance based. ➢ Annual Incentives Based on Performance – Our AIP awards are based onCompanyfinancial andkeyoperationalperformancemeasures. ➢ Balanced Mix of Performance-Based Compensation – We have a balanced compensation program that includes a mix of short- and long-term incentives with performance measures designed to motivate our executives to improve both our financial and stock-price performance and maintain alignment with both shortandlong-termobjectives. ➢ Anti-Hedging and Anti-Pledging Policies – We prohibitourexecutivesanddirectorsfromhedging andpledgingCompanysecurities. ➢ Broad-based Long-Term Incentive Program – We grant long-term incentive awards broadly within the Company. In 2017, we granted awards to 405 non-executive management employees in an effort to promote stock ownership and alignmentwithourstockholders’interests. 30