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Edgar Filing: RYERSON TULL INC /DE/ - Form DEF 14A

To assess the market competitiveness of Company compensation, and to determine compensation of executive officers, the Committee reviews survey materials prepared by the external compensation consultants on the compensation practices of companies it considers as competitors for executive talent. For 2002 and 2003, those companies consisted of three comparison groups: a 20-company custom peer group of general distribution, industrial and service companies, including metals service centers, with median sales, assets and total employees similar to those of the Company; the self-constructed peer group presented in the chart comparing cumulative total stockholder return immediately following this Report; and a group of 86 general industrial companies with median sales comparable to those of the Company.

Total compensation opportunity consists of base salary, cash awards under the short-term incentive plan, and equity awards under the long-term incentive plan. The Committee targets total salary and short-term incentive opportunity for the Company s executive officers at the median of total opportunity for the comparable pay factors and positions in the comparison groups and targets long-term incentive opportunity below that median. The Committee intends that short-term and long-term incentive pay targets represent at least half of total compensation opportunity for executive officers and that the relative proportion of incentive pay increase from that level for the senior executive officers and chief executive officer.

Base Salary Determinations

The Committee reviews base salary compensation of executive officers annually. It considers factors such as the competitive market, individual performance, experience, internal equity, long-term potential, retention concerns and the desired pay mix. During 2002, the Committee approved management s recommendation for a base salary freeze for executive officers, with certain exceptions. 2002 salary adjustments for executive officers generally reflected internal equity concerns.

Mr. Novich, as Chief Executive Officer of the Company, meets regularly with the Committee and with the non-management directors. These meetings include an annual review by all of the outside directors of his financial, operating and organizational goals, his performance as it relates to achievement of the prior year s goals, and the Company s financial performance. The results of this evaluation are an important element in the compensation decisions made by the Committee and the Board of Directors of the Company regarding Mr. Novich s base salary and incentive compensation. In 2002, the Committee accepted Mr. Novich s recommendation that his base salary remain unchanged.

Short-Term Incentive Compensation

Short-term incentive compensation is payable as a cash bonus under the Ryerson Tull Annual Incentive Plan. The plan generally provides for cash bonuses to be paid based on a specified percentage of a participant s salary earnings and the extent to which corporate and (or) business unit performance standards are met for the year. Actual awards paid depend on the extent to which the annual targets are achieved.

The Committee has historically set the annual targets using two financial performance measures, operating return on operating assets and revenue growth, with the formula weighted to operating return on operating assets. In the first quarter of 2002, the Committee used these measures to establish target awards for all executive officers based on either overall Company and/or business unit performance. In 2002, one of the Company s business units achieved the threshold levels of return on operating assets and revenue growth established for it. The Company did not achieve the financial targets established for overall company performance.

For a separate business unit reporting to Mr. Delaney, the Committee established different 2002 target awards during the first quarter 2002 based on separately measured performance standards. That business unit achieved the threshold level established for operating profit percentages and revenue growth, resulting in payment of an award to Mr. Delaney based on its performance.

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