SCHN 2017 Proxy Statement

Compensation Discussion and Analysis • 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. – Since 2008, the Committee has not included excise tax gross-ups in any new or modified change-in-control agreements. • 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. – The complementary and diverse performance metrics across our plans are designed to drive balanced decision-making, consistent with our model of shareholder value creation. – Incentive funding has been modified to cap or limit payments when earnings results fall below threshold levels. • Minimal perquisites – Perquisites totaled less than $40,000 in fiscal 2017 for the CEO and less than $15,000 for each other NEO. • Independent compensation consultant – The Committee directly retains Pearl Meyer as its compensation consultant. Pearl Meyer does not provide any other services to the Company. Fiscal 2017 Business Performance Our earnings performance improved significantly in fiscal 2017 compared to fiscal 2016, and we delivered our strongest financial performance in the past six years. These results reflect our success in sustaining the benefits from our multi- year cost savings and productivity improvement initiatives, increasing our sales diversification, expanding our supply channels, enhancing our nonferrous metal recovery, and improved market conditions. As shown in the charts below, we delivered significant improvements in our business performance in fiscal 2017. Our fiscal 2017 reported earnings per share of $1.60 and adjusted earnings per share of $1.53 represent substantial increases compared to fiscal 2016 reported loss per share of $0.66 and adjusted earnings per share of $0.69. Our Auto and Metals Recycling (AMR) business nearly doubled its operating performance year-over-year. In our Cascade Steel and Scrap (CSS) business, we completed the integration of our steel manufacturing and Oregon metals recycling businesses and invested in a major equipment upgrade aimed at increasing productivity and enhancing product quality. Our strong operating income performance in fiscal 2017 enabled us to deliver operating cash flow of $100 million and reduce our debt by 25% while continuing to invest in our Company and return capital to our shareholders through our quarterly dividend. 34 | Notice of Annual Meeting of Shareholders and 2017 Proxy Statement