2018 Guide to Effective Proxies

2.17.5 Elements of pay tables | 357 6 TH EDITION | GUIDE TO EFFECTIVE PROXIES COMPENSATION DISCUSSION AND ANALYSIS Compensation Mix: Components and Objectives of Short- and Long-Term Compensation In accordance with our overall compensation philosophy and program, executives are provided with a mix of base salary, short-term incentives, long-term incentives and employee benefits. Our compensation philosophy places a significant portion of the potential compensation for each NEO “at risk” such that compensation will vary based on performance of the Company or the NEO. “Variable” compensation is a component of compensation for most of our employees, but a higher proportion of our NEOs’ compensation is at risk than that of our general employee population. The following table describes the material elements of compensation and the objectives of each material element: PROGRAM DESCRIPTION OBJECTIVES 2017 DECISIONS ANNUAL COMPENSATION: Base Salary ‰ Annual cash compensation. ‰ Retention. ‰ Recognition of sustained individual performance. ‰ Attract qualified employees. ‰ For fiscal year 2017, the Committee did not adjust the base salary level for Mr. Alvarado based on a review of the competitive positioning of his base salary. All other NEOs received market-competitive promotional increases, salary adjustments, and/or merit increases to base salary, ranging from 2.6% to 26.5%. Annual Cash Incentive Bonus ‰ Bonus plan based on achieving pre-established performance goals set by the Committee. ‰ Bonus payouts for achieving pre-established performance goals may be reduced (but not increased) at the discretion of the Committee. ‰ Focus executives on achieving pre-established performance goals, such as return on invested capital or net assets, net income, EBITDA, and operational goals and objectives. ‰ Based on the achievement of corporate financial, operational and/or business unit goals, the Committee certified payouts, on average, of 107.9% of target for the NEOs with company-wide positions and 109.1% of target for one NEO. Additional Cash Bonuses ‰ Cash bonuses awarded at the discretion of the Committee. ‰ The Committee may consider any circumstances it deems appropriate in paying out additional bonus dollars. ‰ Provide the Committee with flexibility to reward individual performance not reflected in pre-established performance goals under the Annual Cash Incentive Bonus program, including to reward expanded responsibilities or contributions to special Company initiatives. ‰ Focus employees on performance. ‰ Reviewed annually for individual contributions in context of Company performance, internal pay equity and external market review. ‰ Ms. Lindsey and Messrs. Porter and Kirkpatrick received additional cash bonuses, representing approximately 1%, 3% and 1% of their respective total compensation, in recognition of their significant efforts and contributions during fiscal year 2017. LONG-TERM COMPENSATION: Long-Term Incentive Program ‰ A long-term incentive program using a combination of time- vested and performance- based awards. ‰ Focus on long-term Company performance and long-term success. ‰ Retention. ‰ Align employee and stockholder interests via performance goals and stock ownership. ‰ Performance-based stock units represent 50%of the long-term grant value, with 75%of vesting based on three-year EBITDA and ROIC targets and 25% vesting based on relative total shareholder return. The remaining long-term grant value was delivered as time- based RSUs. ‰ The long-term incentive awards for the three-year performance period ending in 2017 vested at 111%of the EBITDA target and 198%of the TSR target for all NEOs. 31 COMMERCIAL METALS COMPANY