SCHN 2017 Proxy Statement

Compensation Discussion and Analysis Elements of Compensation Our executive compensation program consists of the items described below. Program (1) Purpose Relevant Performance Metrics Annual Base Salary CEO: 17% Other NEOs: 31% To provide a competitive foundation and fixed rate of pay for the position and associated level of responsibility Not Applicable Annual Performance Bonus Program (APBP) for CEO: 27% To incentivize CEO achievement of annual operating, financial, and management goals EPS (50%) Safety Performance (2) (10%) Cost Savings (10%) Operating Cash Flow (10%) Strategic Objectives (20%) Performance Improvements (3) Annual Incentive Compensation Plan (AICP) for other NEOs: 23% To incentivize achievement of annual operating, financial, and management goals EPS (55%) Safety Performance (2) (15%) Cost Savings (15%) Operating Cash Flow (15%) Performance Improvements (3) Long Term Restricted Stock Units CEO: 28% Other NEOs: 23% To focus NEOs on long-term shareholder value creation and promote retention Absolute share price appreciation Performance Share Awards CEO: 28% Other NEOs: 23% To focus NEOs on achievement of financial goals and long-term shareholder value creation Relative Total Shareholder Return (TSR) (50%) Cash Flow Return on Investment (CFROI) (50%) (1) Represents a percentage of total compensation. (2) Lost Time Incident Rate (“LTIR”); Total Case Incident Rate (“TCIR”); and Days Away, Restricted or Transferred Rate (“DART”) (3) Separate one-year PIBP for the 12-month period ending February 28, 2017 described below under “Components of Compensation-Performance Improvement Bonus Plan”. For performance shares awarded in fiscal 2017, the performance period was three years and the following metrics are utilized: • Relative TSR against a peer group of companies with similar financial and operational characteristics (50% weighting); and • CFROI against specific targets over the three-year performance period (50% weighting). Working with its independent compensation consultant, the Committee determined that TSR provides better alignment with the experience of shareholders and that CFROI is well- aligned with shareholder value creation since it measures the generation and efficient use of capital. The Committee believes that our compensation programs provide an appropriate balance between: • fixed and at-risk pay; and • short-term and long-term incentives. While the Committee focuses on the total compensation opportunity for the NEO and not on a specific percentage of total compensation for any particular element, a substantial portion of the compensation opportunity beyond base salary is at-risk and must be earned based upon achievement of annual and long-term performance goals. The proportion of compensation designed to be delivered in base salary versus variable pay depends on the NEO’s position and the opportunity for that position to influence performance outcomes; the relative levels of compensation are based on differences in the levels and scope of responsibilities of the NEOs. Generally, the more senior the level of the NEO and the broader his or her responsibilities, the greater the amount of pay opportunity that is variable. 40 | Notice of Annual Meeting of Shareholders and 2017 Proxy Statement