Use these links to rapidly review the documentTABLE OF CONTENTSTable of ContentsContents:Executive Compensation
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
| Filed by the Registrantý | ||
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o | | Preliminary Proxy Statement |
o | | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
ý | | Definitive Proxy Statement |
o | | Definitive Additional Materials |
o | | Soliciting Material under §240.14a-12 |
| PRINCIPAL FINANCIAL GROUP, INC. | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
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o | | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | ||
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| | (2) | | Aggregate number of securities to which transaction applies: | |
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April 10, 2013Notice of 2016 Annual Meeting
of Shareholders and Proxy Statement
Dear Shareholder:Fellow Shareholders:
You are cordially invited to attend the annual meeting of shareholders on Tuesday, May 21, 2013,17, 2016, at 9:00 a.m., Central Daylight Time, at 711 High750 Park Street, Des Moines, Iowa.
As you can see, we have some exciting news to share. We have a new look:
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We're the same company. Only with a bold new global identity to better represent who we are—a partner in financial progress, committed to helping people around the world live their best lives.
The notice of annual meeting and proxy statement provide an outline of the business to be conducted at the meeting. IWe will also report on the progress of the Company, duringshare an update on the past yearrollout of our new brand expression, and answer shareholder questions.
We had a significant change in leadership of the Company in 2015, with Larry Zimpleman transitioning to Chairman, and Daniel Houston taking on the role of Chief Executive Officer as a part of our planned leadership succession. More change will come following the annual meeting when Mr. Houston takes over as Chairman and Mr. Zimpleman leaves the Board having completed his last term.
We also went through an exciting initiative to redefine the Principal® brand. We continue to improve on providing a quality customer experience, simplifying our value proposition, and being a great place to do business and a successful global organization.
We encourage you to read this proxy statement and vote your shares. You do not need to attend the annual meeting to vote. You may complete, date and sign a proxy or voting instruction card and return it in the envelope provided (if these materials were received by mail) or vote by using the telephone or the Internet. Thank you for acting promptly.
Distribution of annual meeting materials
As we've done in the past, The Principal is taking advantage of the Securities and Exchange Commission's rule that allows companies to furnish proxy materials for the annual meeting via the Internet to registered shareholders. For each shareholder selecting to receive these materials electronically in the future, the Principal Financial Group and the Arbor Day Foundation will plant the same number of trees in a U.S. forest. In 2012, 1,8702015, 1,116 trees were planted.
Sincerely,
Larry D. Zimpleman
Chairman
Sincerely,
Daniel J. Houston
President and Chief Executive Officer
April 7, 2016
Notice of Annual Meeting of Shareholders
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PRINCIPAL FINANCIAL GROUP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 21, 2013
The annual meeting of shareholders of Principal Financial Group, Inc. (the "Company"("Company" or "Principal") will be held at 711 High750 Park Street, Des Moines, Iowa, on Tuesday, May 21, 2013,17, 2016 at 9:00 a.m., Central Daylight Time. Matters to be voted on are:The agenda is:
These items are fully described in the proxy statement, which is part of this notice. The Company has not received notice of other matters that may be properly presented at the annual meeting.
ShareholdersYou can vote if you were a shareholder of record at the close of business on March 25, 2013, are entitled to vote at the meeting.22, 2016. It is important that your shares be represented and voted at the meeting. Whether or not you plan to attend the meeting, please vote in onevote:
| Internet | | Telephone | | |
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| Through the Internet:visit the website noted in the notice of Internet availability of proxy materials shareholders received by mail, on the proxy or voting instruction card, or in the instructions in the email message that notified you of the availability of the proxy materials. | | By telephone:call the toll free telephone number shown on the proxy or voting instruction card or the instructions in the email message that notified you of the availability of the proxy materials. | | Complete, sign and promptly return a proxy or voting instruction cardin the postage paid envelope provided. |
If you attend the following ways:
Shareholders will need to register at the meeting and present a valid, government issued photo identification to attend the meeting.identification. If your shares are not registered in your name (for example, you hold the shares through an account with your stockbroker), you will need to bring proof of your ownership of those shares to the meeting in order to register. You should ask the broker, bank or other institution that holds your shares to provide you with either a copy of an account statement or a letter that shows your ownership of Principal Financial Group, Inc. common stock on March 25, 2013.22, 2016. Please bring that documentation to the meeting to register.
By Order of the Board of Directors
Karen E. Shaff
Executive Vice President, General Counsel and Secretary
April 7, 2016
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 17, 2016:
The 2015 Annual Report, 2016 Proxy Statement and other proxy materials are available at
www.principal.com.
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Your vote is important! Please take a moment to vote by Internet, telephone or proxy card as explained in the How Do I Vote sections of this document.
TABLE OF CONTENTS Table of Contents
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Notice of Annual Meeting of Shareholders | | |
Table of | | |
Director Qualifications, Director Tenure, Process for Identifying and Evaluating Director Candidates and Diversity of the Board | | 4 |
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Proposal | | |
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Corporate Governance | | |
Board Leadership Structure | | |
Role of the Board of Directors in Risk Oversight | | |
Succession Planning and Talent Development | | 12 |
Majority Voting | | |
Director Independence | | |
Certain Relationships and Related Party Transactions | | |
Board Meetings | | |
Corporate Code of Business Conduct and Ethics | | |
Board Committees | | |
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Fees Earned by Directors in | | |
Deferral of Cash Compensation | | |
Restricted Stock Unit Grants | | |
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Directors' Stock Ownership Guidelines | | |
Audit Committee Report | | 19 |
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Executive Compensation | | |
Compensation Discussion and Analysis | | |
2015 Company Highlights | | 22 |
2015 Compensation Highlights | | 22 |
Compensation Program Philosophy and Policies | | 23 |
Summary of Compensation Elements | | 24 |
How we Make Compensation Decisions | | 25 |
2015 Executive Compensation Decisions | | 27 |
Base Salary | | 28 |
Annual Incentive Pay | | 28 |
Long Term Incentive Compensation | | 31 |
Timing of Stock Option Awards and Other Equity Incentives | | 32 |
Benefits | | 33 |
Change of Control and Separation Pay | | 33 |
Perquisites | | 34 |
Stock Ownership Guidelines | | 34 |
Claw Back Policy | | 34 |
Trading Policy | | 34 |
Succession Planning | | 35 |
Human Resources Committee Report | | 35 |
Risk Assessment of Employee Incentive Plans | | 35 |
Summary Compensation Table | | |
Grants of | |
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Outstanding Equity Awards at Fiscal Year End December 31, | | ||
Option Exercises and Stock Vesting | | ||
Pension Plan Information | | ||
Pension Distributions | | 43 | |
Pension Benefits | | ||
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Qualified 401(k) Plan and Excess Plan | | 44 | |
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Payments Upon Termination | | ||
Employment Agreement | | ||
Severance Plans | | ||
Change of Control Employment Agreements | | ||
Potential Payments Upon a Termination Related to a Change of Control | | ||
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Proposal | | ||
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Proposal | | ||
Audit Fees | | ||
Audit Related Fees | | ||
Tax Fees | | ||
All Other Fees | | ||
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Security Ownership of Certain Beneficial Owners and Management | | ||
Section 16(a) Beneficial Ownership Reporting Compliance | | ||
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Questions and Answers About the Annual | | ||
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Appendix | | ||
Appendix B Non GAAP Financial Measures | | B-1 |
PROXY STATEMENT
PRINCIPAL FINANCIAL GROUP, INC.711 HIGH STREETDES MOINES, IOWA 50392-0100
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
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Why didn't I receive a copy of the paper proxy materials?
The Securities and Exchange Commission ("SEC") rules allow companies to deliver a notice of Internet availability of proxy materials to shareholders and provide Internet access to those proxy materials. Shareholders may obtain paper copies of the proxy materials free of charge by following the instructions provided in the notice of Internet availability of proxy materials.
Why did I receive notice of and access to this proxy statement?
The Board of Directors ("Board") of Principal Financial Group, Inc. ("Company") is soliciting proxies to be voted at the annual meeting of shareholders to be held on May 21, 2013, at 9:00 a.m., Central Daylight Time, at 711 High Street, Des Moines, Iowa, and at any adjournment or postponement of the meeting ("Annual Meeting"). When the Board asks for your proxy, it must send or provide you access to proxy materials that contain information required by law. These materials were first made available, sent or given to shareholders on April 10, 2013.
What is a proxy?
It is your legal designation of another person to vote the stock you own. The other person is called a proxy. When you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. The Company has designated three of the Company's officers to act as proxies for the 2013 Annual Meeting: Joyce N. Hoffman, Senior Vice President and Corporate Secretary; Terrance J. Lillis, Senior Vice President and Chief Financial Officer; and Karen E. Shaff, Executive Vice President and General Counsel.
What will the shareholders vote on at the Annual Meeting?
Will there be any other items of business on the agenda?
The Company does not expect any other items of business because the deadline for shareholder proposals and nominations has passed. However, if any other matter should properly come before the meeting, the people authorized by proxy will vote according to their best judgment.
Who can vote at the Annual Meeting?
Shareholders as of the close of business on March 25, 2013 ("Record Date") can vote at the Annual Meeting.
How many votes do I have?
You will have one vote for every share of Company common stock ("Common Stock") you owned on the Record Date.
What constitutes a quorum?
One-third of the outstanding shares of Common Stock as of the Record Date. On the Record Date, there were 293,496,776 shares of Common Stock outstanding. A quorum must be present, in person or by proxy, before any action can be taken at the Annual Meeting, except an action to adjourn the meeting.
How many votes are required for the approval of each item?
What are Broker Non-votes?
If your shares are held in a brokerage account, your broker will ask you how you want your shares to be voted. If you give your broker directions, your shares will be voted as you direct. If you do not give directions, the broker may vote your shares on routine items of business, but not on non-routine items. Proxies that are returned by brokers because they did not receive directions on how to vote on non-routine items are called "broker non-votes."
How do I vote by proxy?
Shareholders of record may vote by mail, by telephone or through the Internet. Shareholders may vote "for," "against" or "abstain" from voting for each of the Director nominees, the proposal on the annual election of Directors, the advisory vote to approve executive compensation and the proposal to ratify the appointment of the independent auditors.
How do I vote shares that are held by my broker?
If you own shares held by a broker, you may direct your broker or other nominee to vote your shares by following the instructions that your broker provides to you. Most brokers offer voting by mail, telephone and through the Internet.
How do I vote in person?
If you are going to attend the Annual Meeting, you may vote your shares in person. However, we encourage you to vote in advance of the meeting by mail, telephone or through the Internet even if you plan to attend the meeting.
How do I vote my shares held in the Company's 401(k) plan?
The trustees of the plan will vote your shares in accordance with the directions you provide by voting on the voting instruction card or the instructions in the email message that notified you of the availability of the proxy materials. Shares for which voting instructions are not received are voted in the discretion of the trustees.
How are shares held in the Demutualization separate account voted?
The Company became a public company on October 26, 2001, when Principal Mutual Holding Company converted from a mutual insurance holding company to a stock company (the "Demutualization") and the initial public offering of shares of the Company's Common Stock was completed. The Company issued Common Stock to Principal Life Insurance Company ("Principal Life"), and Principal Life allocated this Common Stock to a separate account that was established to fund policy credits received as Demutualization compensation by certain employee benefit plans that owned group annuity contracts. Although Principal Life will vote these shares, the plans give Principal Life voting directions. A plan may give voting directions by following the instructions on the voting instruction card or the instructions in the message that notified you of the availability of proxy materials. Principal Life will vote the shares as to which it received no direction in the same manner, proportionally, as the shares in the Demutualization separate account for which it has received instructions.
Who counts the votes?
Votes will be counted by Computershare Trust Company, N.A.
What happens if I do not vote on an issue when returning my proxy?
If no specific instructions are given, proxies that are signed and returned will be voted as the Board of Directors recommends: "For" the election of all Director nominees, "For" the proposal on the annual election of Directors, "For" approval of the Company's executive compensation and "For" the ratification of Ernst & Young LLP as independent auditors.
How do I revoke my proxy?
If you hold your shares in street name, you must follow the instructions of your broker or bank to revoke your voting instructions. Otherwise, you can revoke your proxy or voting instructions by voting a new proxy or instruction card or by voting at the meeting.
What should I do if I want to attend the Annual Meeting?
Please bring photo identification and, if your stock is held by a broker or bank, evidence of your ownership of Common Stock as of March 25, 2013. The notice of Internet availability of proxy materials you received in the mail, a letter from your broker or bank or a photocopy of a current account statement will be accepted as evidence of ownership.
How do I contact the Board?
The Company has a process for shareholders and all other interested parties to send communications to the Board through the Presiding Director. You may contact the Presiding Director of the Board through the Investor Relations section of the Company's website atwww.principal.com, or by writing to:
Presiding Director, c/o Joyce N. Hoffman, Senior Vice President and Corporate SecretaryPrincipal Financial Group, Inc.Des Moines, Iowa 50392-0300
All emails and letters received will be categorized and processed by the Corporate Secretary and then sent to the Company's Presiding Director.
How do I submit a shareholder proposal for the 2014 Annual Meeting?
The Company's next annual meeting is scheduled for May 20, 2014. Proposals should be sent to the Corporate Secretary. Proposals to be considered for inclusion in next year's proxy statement must be received by December 11, 2013. In addition, the Company's By-Laws provide that any shareholder wishing to propose any other business at the annual meeting must give the Company written notice between January 21, 2014 and February 24, 2014. That notice must provide other information as described in the Company's By-Laws, which are on the Company's website,www.principal.com.
What is "householding?"
We send shareholders of record at the same address one copy of the proxy materials unless we receive instructions from a shareholder requesting receipt of separate copies of these materials.
If you share the same address as multiple shareholders and would like the Company to send only one copy of future proxy materials, please contact Computershare Trust Company, N.A. at 866-781-1368, or P.O. Box 43078, Providence, RI 02940-3078. You can also contact Computershare to receive individual copies of all documents.
Where can I receive more information about the Company?
We file reports and other information with the SEC. This information is available on the Company's website atwww.principal.com and at the Internet site maintained by the SEC atwww.sec.gov. You may also contact the SEC at 1-800-SEC-0330. The Audit, Finance, Human Resources and Nominating and Governance Committee charters, the Company's Corporate Governance Guidelines, and the Corporate Code of Business Conduct and Ethics are also available on the Company's website,www.principal.com.
The Board urges you to exercise your right to vote by using the Internet or telephone or by returning the proxy or voting instruction card.
Director Qualifications, Director Tenure, Process for Identifying and Evaluating Director Candidates and Diversity of the Board
The Nominating and Governance Committee regularly assesses the expertise, skills, backgrounds, competencies and other characteristics of Directors and candidates for Board vacancies in light of the current Board makeup and the Company's strategic initiatives, risk factors, and other relevant circumstances, such as a candidate's current employment responsibilities. The Committee also assesses personal and professional ethics, integrity, values and ability to contribute to the Board. The Board values experience as a current or former CEO or other senior executive in financial services, in international business and with financial management or accounting responsibilities. The following competencies are also particularly valued: strategic orientation, results orientation and comprehensive decision making, risk management and an understanding of current technology issues. The Committee periodically uses an outside consultant to assist with this responsibility, and these assessments provide direction in searches for Board candidates and in the evaluation of current Directors for nomination. The Committee reviews the performance of Directors whose terms are expiring as part of the determination of whether to recommend their nomination for reelection to the Board. Input is also received from the other Directors and an outside consultant may be engaged to assist with these reviews. Director performance and capabilities are evaluated against the characteristics noted above. Following the Committee's discussion, the outside consultant (or the Committee Chair) provides feedback to the Directors who were evaluated. The Board annually conducts a self-evaluation regarding its effectiveness, and the Audit, Finance, Human Resources and Nominating and Governance Committees also annually evaluate their respective committee's performance.
All Board members have:
Several current independent Directors have led businesses or major business divisions as CEO or President (Ms. Bernard, Dr. Costley, Mr. Dan, Mr. Ferro, Dr. Gelatt, Mr. Hochschild, Mr. Pickerell and Ms. Tallett). The following chart shows areas central to the Company's strategy, initiatives and operations for which independent Directors have specific training and executive level experience that assists them in their responsibilities.
Though the Board does not have a formal diversity policy, diversity of the Board is a valued objective. Therefore, the Nominating and Governance Committee reviews the Board's needs and diversity in terms of race, gender, national origin, backgrounds, experiences and areas of expertise when recruiting new Directors. Forty percent of the Company's independent Directors are women. The Board's diversity objective reflects the values of the Company as
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well. Principal has been recognized as one of the National Association of Female Executives' Top Companies for Executive Women for 13 consecutive years; received top marks from the Human Rights Campaign Foundation's 2016 Corporate Equality Index; and was named one of the 25 most influential companies for veteran hiring by Diversity Journal in 2015. We also were named one of the Ethisphere Institute World's Most Ethical Companies, Forbes America's Best Employers, and Working Mother magazine's 100 Best Companies. The Board's effectiveness benefits from Directors who have the skills, backgrounds and qualifications needed by the Board and who also increase the Board's diversity.
The Board believes that its thorough Director performance reviews and healthy Board refreshment processes better serve Principal and its stakeholders than would mandatory term limits. Strict term limits would require that Principal lose the continuing contribution of Directors who have invaluable insight into Principal and its industry, strategies and operations as a result of their experience. Directors' terms must not extend past the annual meeting following their 72nd birthday. The tenure of the independent Directors is listed below. The average tenure of Principal's independent Directors is 13.2 years.
Two new independent Directors were added to the Board in 2015: Roger C. Hochschild and Blair C. Pickerell. Mr. Hochschild has executive level experience in asset and investment management, retail consumer services, executive compensation, financial services, marketing, mergers & acquisitions, product development, risk management and strategic planning. Mr. Pickerell has extensive experience with the asset and investment management and financial services industries as well as considerable international expertise. Both additions were the result of a lengthy search that included consideration of numerous highly qualified director candidates. The search was led by the Nominating and Governance Committee, with the assistance of a search firm. Director candidates met with Betsy J. Bernard, Chair of the Nominating and Governance Committee, Lead Director Elizabeth Tallett, Mr. Zimpleman (then Chairman and CEO) and other members of senior management. The Nominating and Governance Committee is in the process of identifying a replacement for Dr. Costley, who has reached the Board's retirement age. We anticipate that three additional tenured Directors will be replaced over the next six years, continuing our process of regularly refreshing the talents and perspectives reflected on our Board. The tenure of the Directors, as reflected in the chart above, balances deep knowledge of the Company, its industry and relevant issues, with fresh perspectives and additional expertise, while providing the oversight and independence needed to meet the interests of our shareholders.
Communicating with stakeholders including clients, customers, employees, and investors, has always been an important part of how Principal conducts its business. Principal has had in place for some time a formal engagement process with shareholders around matters of corporate governance. This past year, with the Board's Lead Director, we met in person with holders of a significant percentage of the Company's outstanding Common Stock and had robust discussions regarding our core corporate governance policies. These discussions provided us with helpful insight into shareholders' views on current governance topics, which were reported to the Nominating and Governance Committee and the full Board. This process, and past engagement efforts, regularly supplement relevant communications regarding corporate governance made through the Company's website and by the Investor Relations staff.
The Nominating and Governance Committee will consider shareholder recommendations for Director candidates sent to it c/o the Company Secretary. Director candidates nominated by shareholders are evaluated in the same manner as Director candidates identified by the Committee and search firms it retains.
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PROPOSAL ONE – ELECTION OF DIRECTORS
Proposal One—Election of Directors
The Board is divided into three classes, with each class having a three yearthree-year term. All of the nominees are currently Directors of Principal. We have no reason to believe that any of the Company.nominees will be unable or unwilling for good cause to serve if elected. However, if any nominee should become unable for any reason or unwilling for good cause to serve, proxies may be voted at the 2016 Annual Meeting for another person nominated as a substitute by the Board, or the Board may reduce the number of directors.
The Board of Directors recommends that shareholders vote "For" all of the nominees for election at the Annual Meeting.
Nominees for Class III Directors With Terms Expiring in 2016
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| | Committees: Human Resources (Chair) Former Public Directorships/Past 5 Mr. Dan was Chairman, President and Chief Executive Officer of The Brink's Company, a global provider of secure transportation and cash management services, from SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of Brink's, Mr. Dan has He studied business and accounting at Morton College in Cicero, Illinois, and completed the advanced management program at Harvard Business School. | |
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| | Committees: Audit, Human Resources, Strategic Issues Dr. Gelatt has been President of NMT Corporation since 1987. NMT is an industry leader in mobile mapping and workforce automation software and has been providing SKILLS AND QUALIFICATIONS: In addition to leading and having financial responsibility for NMT and other Gelatt He earned his bachelor's and master's degrees at the University of Wisconsin and his MA and Ph.D. at Harvard University. | ||
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| | Committees: Audit (Chair), Finance, Executive Public Directorships/Past 5 Years: Lexmark International, Inc Former Public Directorships/Past 5 Years: Covance, Inc. Ms. Helton was Executive Vice President and Chief Financial SKILLS AND QUALIFICATIONS: Ms. Helton has global Ms. Helton graduated from the University of Kentucky in 1971 with a B.S. degree in mathematics, summa cum laude, and earned an S.M. degree from Massachusetts Institute of Technology's Sloan School in 1977 with double majors in Finance and Planning & Control. | |
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Blair C. Pickerell | |
Committees: Public Directorships/Past 5 Mr. Mr. Pickerell's current international service includes memberships on the Supervisory Committee for the Tracker Fund of Hong Kong; on the International Advisory Board of the Securities and Exchange Board of India; on the Listing Committee of The Stock Exchange of Hong Kong; and as Director of the Faculty of Business and Economics of The University of Hong Kong. The Nominating and Governance Committee used a search firm to identify and recruit Mr. Pickerell. SKILLS AND QUALIFICATIONS: In addition to his extensive leadership record in the investment and asset management and financial services industries, Mr. Pickerell has executive level experience in the retail consumer, international, marketing, mergers & acquisitions, product development and strategic planning. He is fluent in Mandarin Chinese. He earned a bachelor's degree from Stanford University and an MBA from Harvard Business School. | ||
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Continuing Class II Directors With Terms Expiring in 2018
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Roger C. Hochschild | | Committees: Strategic Issues (since September 23, 2015) and Audit and Human Resources (effective May 18, 2015) Mr. Hochschild has been SKILLS AND QUALIFICATIONS: Mr. Hochschild has executive level experience in asset and investment management, retail consumer services, executive compensation, financial services, marketing, mergers & acquisitions, product development, risk management and strategic planning. He holds a bachelor's degree in economics from Georgetown University and an M.B.A. from the Amos Tuck School at Dartmouth College. |
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Daniel J. Houston | | Former Public Directorships/Past 5 Years: Catalyst Health Solutions, Inc. Mr. Houston has been President and Chief Executive Officer of the Company and Principal Life since
SKILLS AND QUALIFICATIONS: Mr. Houston has operational expertise, global awareness, and deep talent leadership skills. During his career with the Company, he has worked in sales, managed numerous businesses and helped lead the transformation of the Company to a global investment management leader. He Mr. Houston received a bachelor's of science degree |
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Elizabeth E. Tallett | | Committees: Human Resources, Nominating and Governance, Executive Public Directorships/Past 5 Years: Meredith Corporation, Qiagen, N. V., Anthem, Inc. Former Public Directorships/Past 5 Years: Coventry Health Care, Inc., Immunicon, Inc., IntegraMed America, Inc., Varian, Inc. and Varian SemiConductor Equipment Associates, Inc. Ms. Tallett has been Lead Director since 2007 and has also served as Alternate Lead Director. She was honored recently with a 2015 Outstanding Director award from the Financial Times. Ms. Tallett was Principal of Hunter Partners, LLC, a management company for early to mid stage pharmaceutical, biotech and medical device companies, from July 2002 to Feb 2015. She continues to operate as a consultant to early stage pharmaceutical and healthcare companies. She has more than 30 years' experience in the biopharmaceutical and consumer industries. SKILLS AND QUALIFICATIONS: Ms. Tallett's senior management experience includes being President and Chief Executive Officer of Transcell Technologies, Inc., President of Centocor Pharmaceuticals, member of the Parke-Davis Executive Committee, and Director of Worldwide Strategic Planning for Warner-Lambert. In addition to her leadership and financial management in pharmaceutical and biotechnology firms, she has executive level experience in multinational companies, international operations, economics, strategic planning, marketing, product development, technology, executive compensation and mergers and acquisitions. She received a bachelor's degree with honors in mathematics and economics from the University of Nottingham in England. |
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Continuing Directors in Class I Directors With Terms Expiring in 2014
2017
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| | Committees: Nominating and Governance (Chair), Human Resources (until May 18, 2015), Finance (effective May 18, 2015), Executive Public Directorships/Past 5 Ms. Bernard has been Alternate Lead Director since May 21, 2007. Ms. Bernard was President of AT&T from October 2002 until December 2003 where she led more than 50,000 employees with AT&T Business, then a nearly $27 billion organization serving four million business customers. She was Chief Executive Officer of AT&T Consumer 2001-2002, which served about 40 million consumers and contributed $11.5 billion to AT&T's normalized revenue in 2002. She was head of the consumer and SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of AT&T, Ms. Bernard has She earned her bachelor's degree from St. Lawrence University, a master's degree in business administration from Fairleigh Dickinson University, and an MA from Stanford University in the Sloan Fellow Program. | |
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| | Committees: Finance (Chair), Nominating and Governance Public Directorships/Past 5 Ms. Carter-Miller has been President of TechEd Ventures since 2005, SKILLS AND QUALIFICATIONS: In addition to her marketing leadership background, Ms. Carter-Miller has She earned her B.S. in Accounting at the University of Illinois and an MBA in Finance and Marketing at the University of Chicago. |
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Dennis H. Ferro | |
Committees: Audit, Finance, Strategic Issues Former Public Directorships/Past 5
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Mr. Ferro served as President and Chief Executive Officer of Evergreen Investment Management Company, an asset management firm, from 2003 to 2008. Evergreen had assets under management of $175 billion on December 31, 2008, served more than four million individual and institutional investors through management of a broad range of investment products including institutional portfolios, mutual funds, variable annuities and other investments, and was led by 300 investment professionals. Mr. Ferro was the Chief Investment Officer of Evergreen from 1999 to 2003. From 1994-1999, he was Executive Vice President of Zurich Investment Management Ltd. and Head of International Equity Investments, and from 1991-1994 was Senior Managing Director of CIGNA International Investments. Prior to 1991, he held positions with Bankers Trust Company in Japan, as President and Managing Director, and in Florida and New York. Mr. Ferro is a member of the Investment Committee of the American Bankers Association. During SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of Evergreen Investment Management Company, Mr. Ferro has He earned a bachelor's degree from Villanova University and an MBA in finance from St. John's University. Mr. Ferro is a Chartered Financial Analyst ("CFA"). |
Continuing Class II Directors With Terms Expiring in 2015
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The Board of Directors recommends that shareholders vote "For" all of the nominees for election at the Annual Meeting.
PROPOSAL TWO – ANNUAL ELECTION OF DIRECTORS
Corporate Governance
The Company's Board and management regularly review best practices for corporate governance and modify our policies and practices as warranted. Our current best practices include:
The Certificate of Incorporation is the governing document that describes how the Company is organized under Delaware law. The Certificate of Incorporation requires that the Directors be divided into three classes of approximately equal size, and that the classes of Directors be elected to serve staggered three-year terms. This is commonly referred to as a "classified board" structure, with only a portion of the full board standing for election each year.
The Company adopted a classified board structure as part of our Demutualization and initial public offering in 2001. The Board of Directors recognized the advantagesevent of a classified board structurelack of majority shareholder support;
The Nominating and Governance Committee and the Board regularly look at the Company's corporate governance practices for continued effectiveness in the current environment. The Committee and the Board undertook a careful review of the classified board structure, including the often cited disadvantage that it does not afford shareholders the opportunity to evaluate and hold directors accountable on an annual basis. The Nominating and Governance Committee and the Board recognized that there are both advantages and disadvantages to a classified board structure, that corporate governance trends indicate companies are moving away from classified boards and that the Principal Financial Group is committed to good corporate governance.
The Board of Directors submitted a proposal for the annual election of Directors to be voted on at the 2011 Annual Meeting. The proposal did not receive the required approval of at least three-fourths of the outstanding shares, as required by the Certificate of Incorporation, and was not adopted. The Board's 2011 proposal provided that all current Directors would serve one more three-year term, then all Directors would be elected annually thereafter. If it had been approved by shareholders, the 2011 proposal would have resulted in all Directors being elected annually by 2016. Now, the Board is submitting a new proposal for the annual election of Directors which, if approved by shareholders, would also result in the annual election of all Directors by 2016. In addition, if the proposal is approved, a majority of the positions on the Board of Directors would be subject to election to one year terms at the 2015 Annual Meeting.
The Board of Directors recommends the amendments to the Company's Certificate of Incorporation set forth in Appendix A to fully implement the annual election of Directors by 2016. If these amendments are approved at the Annual Meeting, the declassified Board structure would be phased-in as follows: The Class III Directors elected at this Annual Meeting will be elected for three-year terms, the Class II Directors elected at the 2012 Annual Meeting will complete their current three-year terms, and the Class I Directors elected in 2014 and all Directors elected thereafter will be elected for one-year terms. This results in the annual election of all Directors by 2016. In addition, in accordance with Delaware law and once the annual election of Directors is fully implemented under the Board's proposal, Directors may be removed by the vote of shareholders with or without cause.
Delaware law provides that the shareholders must approve this recommendation of the Board of Directors to amend the Certificate of Incorporation before the amendments and these changes can be effective. The Certificate of Incorporation requires that at least three-fourths of the outstanding shares entitled to vote on this proposal approve the proposal for it to be adopted. If approved by the shareholders, the amendments to the Certificate of Incorporation will be effective upon filing with the Delaware Secretary of State, the Board of Directors will make conforming changes to the Company's By-Laws and the annual election of Directors will be implemented on a phased-in basis as described in this proposal.
The Board of Directors recommends that the shareholders vote "For" this resolution: RESOLVED, that the Company's Certificate of Incorporation be amended as set forth in Appendix A.
CORPORATE GOVERNANCE
Board Leadership Structure
The Principal Financial Group® is a global investment management leader offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement services, insurance solutions and asset management. The business of the Company is managed under the direction of the Board. The Board selects,believes it should have the flexibility to establish a leadership structure that works best for Principal at any given time and provides advice and counsel to,reviews that structure as appropriate. Historically, the Chief Executive Officer ("CEO") and generally oversees management. The Board reviews and discusses the strategic direction of the Company, oversees risk and monitors the Company's performance against goals the Board and management establish.
Board Leadership Structure
The Board currently has a combined positionpositions of Chairman of the Board and CEO have been separately held by two people or combined and held by one person, depending on prevailing circumstances. Currently, these roles are separate: Larry D. Zimpleman and a Presiding Director, Elizabeth E. Tallett. Betsy J. Bernard is the Alternate Presiding Director. The PresidingChairman of the Board, and Dan Houston is the CEO. Effective immediately following the annual meeting, Mr. Houston will be both Chairman of the Board and CEO. Since 1990, the Board has appointed a Lead Director because it is selected byimportant that the other independent Directors andhave a formally acknowledged leader in addition to the position does not automatically rotate. The Nominating and Governance Committee reviewsChairman of the assignments as Presiding Director and Alternate Presiding Director annually.Board who leads the Board generally. The Board regularly reviews its leadership model and is flexible aboutthe effectiveness of this shared leadership. The decision of whether the positions of CEO and Chairman should beto separate or combined. The decisioncombine the Chair and CEO positions is based on factors such as the tenure and experience of the CEO and the broader economic and operating environment of the Company. The Company hasAs was the case during the past year, Principal followed a pattern of separating the roles of Chairman of the Board and CEO during periods of management transition, with the prior Chairman retaining that position for a period of time as the newly-appointednewly appointed CEO assumes new responsibilities as the Company's chief executive. In the Company's experience, a flexible approach is preferable to an approach that either requires or disallows a combined Chairman/CEO.
Ms. Tallett is the Lead Director and Ms. Bernard is the Alternate Lead Director.
The PresidingLead Director and Alternative Lead Director are selected by the independent Directors. The Nominating and Governance Committee reviews the assignments of Lead Director and Alternate Lead Director annually.
The Lead Director and the Chairman jointly make the decisions on the Board's agenda for each regular quarterly meeting, and the PresidingLead Director seeks input from the other independent Directors. The PresidingLead Director and Chairman share the duties of presiding at each Board meeting. The Chairman presides when the Board is meeting as a full Board. The PresidingLead Director:
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Role of the Board in Risk Oversight
Risk management is an essential component of our culture and business model. Management within our business units and functional areas is primarily responsible for identifying, assessing, monitoring and managing risk exposures. The Company's Enterprise Risk Management program includes a Chief Risk Officer, whose team operates independently from the business units, and an Enterprise Risk Management Committee, comprised of members from the executive management team, that provides enterprise wide oversight for material risks. The Company also has a robust internal audit function.
The Board believes that risk oversight is a responsibility of the full Board. The Board weighs risk versus return in the context of the organization's key risksoversees management's execution and risk philosophy when approving corporate strategy and major business decisions, setting executive compensation and monitoring the Company's progress. Like all financial services companies, we are exposed to financial, accounting, operational and other business and industry risks. The Board uses its committees for someperformance of its risk oversight responsibilitiesmanagement responsibilities. The Board reviews strategic threats, opportunities, and the committees report torisks Principal and particular businesses or functions are managing. Oversight of other risks such as credit, market, liquidity, product, operational, cybersecurity and general business risk, is handled directly by the Board on these issues:or by Board Committees as discussed below:
The Audit Committee:
Table of Contentsmanagement.
The Finance Committee:
The Human Resources Committee reviews all incentive: risk and mitigation related to the design and operation of employee compensation arrangements to confirm that they are consistent with business plans, do not encourage inappropriate risk-takingrisk taking and are appropriately designed to limit or mitigate risk. The Human Resources Committee also oversees succession planning and development for senior management.
In selecting candidates forThe Nominating and Governance Committee: risks and mitigation related to the Board,Company's environmental, sustainability and corporate social responsibilities as well as the Company's political contribution activities. The Nominating and Governance Committee takes into accountalso monitors the need for the Board and its committees to have the collective skills and experience necessary to monitor the risks facing the Company.Principal.
Risk management has long been an essential component of the Company's culture and operations. The Company has had a Chief Risk Officer since 2005, who oversees and coordinates the ERM Program, serves on many key management committees and operates independently of the businesses. The Chief Risk Officer regularly attends Audit and Finance Committee meetings and regularly meets in executive session with the Audit Committee along with selected other members of management and without other members of management present at least once a year.
The Chief Risk Officer and other members of senior management make periodicprovide reports to and have discussions with the Board and its committees on the ERM Program,our risk profile and risk management activities. Discussions include reviews of ongoing adherence to policy, impacts of external events, and how strategy, initiatives, and operational initiativesoperations integrate with the Company'sour risk objectives. The Board also receives perspectives from external entities such as our independent auditor, regulators, and consultants. These reportspresentations and discussions provide the Board with a greater understanding of the material risks the organization faces, whether management is responding appropriately, how certain risks relate to other risks, and the level of risk in actions presented for Board approval.approval, how certain risks relate to other risks, and whether management is responding appropriately,
Capital adequacyDuring 2015, the Board deepened its emphasis on cybersecurity risk and structure areour information security program. The Board views this risk as an important focus ofenterprise wide concern that involves people, process, and technology, and accordingly treats it as a Board level matter. It embodies a persistent and dynamic threat to our entire industry that is not limited to information technology. The Board will remain focused on this critical priority by continuing to receive regular reports from the ERM Program. For each regular Board meeting, management reports on sourcesChief Information Officer and uses of capital, satisfaction of regulatoryothers to ensure that it is monitoring cyber threat intelligence and rating agency capital requirements, excess capital position, capital managementtaking the steps necessary to implement the needed safeguards and liquidity.protocols to manage the risk.
Majority Voting
Succession Planning and Talent Development
The Board believes that succession planning for future leadership of the Company is one of its most important roles. The Board is actively engaged and involved in talent management and reviews succession at least annually. This includes a detailed discussion of our global leadership and succession plans with a focus on key positions at the levels of senior vice president and above. In addition, the Human Resources Committee regularly discusses the talent pipeline for critical roles at a variety of organizational levels. High potential leaders are given exposure and visibility to Board members through formal presentations and informal events and the Committee also receives regular updates on key talent indicators for the overall workforce, including diversity, recruiting and development programs.
In uncontested Director elections, Directors are elected by the majority of votes cast in uncontested Director elections.cast. If an incumbent Director is not elected and no successor is elected, the Director must submit a resignation to the Board of Directors, which will
| 122016 Proxy Statement | | |
decide whether to accept the resignation tendered by that incumbent Director.resignation. The Board's decision and reasons forin support of its decision will be publicly disclosed within 90 days of certification of the election results.
Director Independence
The Board determines at least annually whether each Director is independent, using its independence standards in these determinations. These independence standards include the New York Stock Exchange requirements for independence and are on the Company's website,www.principal.com. www.principal.com. The Board considers all commercial, banking, consulting, legal, accounting, charitable, family and other relationships (as(either individually or as a partner, shareholder or officer of an organization) a Director may have with the Company and its subsidiaries. The Board most recently made these determinations for each Director in February 2013,2016, based on:
The Board affirmatively determined that the following Directors (and Arjun Mathrani who served on the Board during 2012) have no material relationship with the Company and are independent: Ms. Bernard, Ms. Carter-Miller, Dr. Costley, Mr. Dan, Mr. Ferro, Dr. Gelatt, Ms. Helton, Mr. Keyser,Hochschild, Mr. MaestriPickerell and Ms. Tallett. The Board also determined that all current members (and Directors who were members in 2012) of the Audit, Finance, Human Resources and Nominating and Governance Committees are independent.
In applying the Board's independence standards, the Nominating and Governance Committee and the Board considered the followingSome Directors have categorically immaterial relationships and transactions to be categorically immaterial to the determination of a Director's independence due to the nature of the transaction and the amount involved (in each of the transactions described below, the annual payments made or received by the Company did not exceed the greater of $1 million or 2 percent of the recipient's gross revenues):with Principal:
Certain Relationships and Related Party Transactions
Nippon Life Insurance Company ("Nippon Life"), which held approximately 6%6.2% of the Company's Common Stock at the end of 2012,2015, is the parent company of Nippon Life Insurance Company of America ("NLICA"). Nippon Life, NLICA and Principal Life have had an ongoinga business relationship for more than 20 years. Principal Life assisted Nippon Life in the start up activities of NLICA, which began business in 1991.In 2015, Nippon Life and NLICA purchase retirement and financial services offered bypaid the following amounts to Principal Life or its subsidiaries and its subsidiaries.affiliates: $91,670.69 for pension services for defined contribution plans maintained by NLICA and an affiliate (mostly paid Principal Life approximately $10 millionby plan participants); $1,250 for third party administration services related to its group welfare benefit plans and approximately $3,242deferred compensation plan services; $757,246.30 for wellness services during 2012. Nippon Life and NLICA also paidinvestment services;. Principal Global Investors LLC ("PGI") and its subsidiaries approximately $920,597(Japan) Ltd. paid Nippon Life $2,607.00 for investment services in 2012, and paid Principal Life approximately $206,114 for service related to its retirement plans in 2012.401(k) plan administration. The Company owns approximately three percent of the common stock of NLICA and Principal Life purchased public bonds with a market value at the end of $52,814,1502015 of $62,700,000 during Nippon Life's $2 billion public issuance in October of 2012.
The Company announced on April Since May 1, 2013, an agreement by its subsidiary, PGI, to sell a 20 percent stake inNLI US Investments, Inc. ("NLI"), has owned 20% of Post Advisory Group, LLC ("Post"), an affiliate of the Company. During 2015, Post paid NLI an aggregate of $2,724,846.71 in dividends.
During 2015, Principal Management Corporation, an affiliate of the Company ("PMC"), paid Wellington Management Company $3,990,303.76 for sub-advisory services furnished to Nippon Life and its affiliate fora registered investment company managed by PMC. As of the end of 2015 Wellington owned approximately $38 million. PGI acquired Post in 2003 and will retain an 80 percent ownership6.5% of the Company's Common Stock.
As of December 31, 2015, the Vanguard Group, Inc. managed funds holding in the business moving forward. Post is an investment manageraggregate 8.3% of high yield fixed income securities with approximately $11.8 billionthe Company's Common Stock. During 2015 Principal Shareholder Services, Inc. paid Vanguard $88,427.27 for sub-transfer agent services. Vanguard paid $1,059,786 in assets under management asrent for lease of March 27, 2013. The transaction is expectedspace to enhance Nippon Life's fixed income investment management offering to its clients and bring new distribution opportunities for Post. Post's management will continue to direct its day-to-day operations, with continued autonomya borrower of investment decisions. The transaction is expected to close in the second quarterPrincipal Life Insurance Company general account.
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The Nominating and Governance Committee or its Chair of the Committee must approve or ratify all transactions with Related Parties that are not pre-approvedpreapproved under the Company's Related Party Transaction Policy. At each quarterly meeting, the Committee reviews a report of any non-materialnonmaterial transactions with Directors or the firms of which they are an executive officer or director, and any other Related Party transactions, including those involving executive officers and shareholders who own more than five percent of the Company's Common Stock.Parties. The Committee ratifies these transactions if it determines they are appropriate. Transactions involving employment of a relative of an executive officer or Director must be approved by the Human Resources Committee. The Company's Related Party Transaction Policy may be found atwww.principal.com. www.principal.com.
Board Meetings
The Board held 1110 meetings in 2012,2015, five of which were two day, in person meetings. Each of the Directors then in office attended more than 75 percent75% in the aggregate of the meetings of the Board and the committees of which the Director was a member.member except Richard L. Keyser and Luca Maestri who left the board in May of 2015. All of the other Directors then in officeon the Board attended the 20122015 Annual Meeting, with the exception of Arjun Mathrani whose retirement from the Board was effective at the time of the Annual Meeting. The Company sets the date and place of Annual Meetings to coincide with a regular Board meeting so that all Directors can attend.
Corporate Code of Business Conduct and Ethics
Each Director and officer of the Company has certified compliance with the CorporateGlobal Code of Business Conduct and Ethics.Ethics, which serves as the foundation for ethical behavior across the organization. The Code is available at www.principal.com.
Board Committees
Only independent Directors may serve on the Audit, Human Resources and Nominating and Governance Committees. Committee members and Committee chairs are recommended to the Board by the Nominating and Governance Committee. The Committees review their charters and evaluate their performance annually. Committee charters of the Audit, Finance, Human Resources and Nominating and Governance Committees are available on the Company's website, www.principal.com.
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www.principal.com.Table of Contents
The following table shows the currentCurrent membership and responsibilities of each of the Board Committees.Committees:
| Committee | | Responsibilities | | Members (*Committee Chair) | | Meetings Held in | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | ||||||||||
| Audit | | • Appointing, terminating, compensating and overseeing the Company's independent • Reviewing and reporting to the Board on the independent auditor's activities; • Approving all audit engagement fees and • Reviewing internal audit plans and results; • Reviewing and reporting to the Board on accounting policies and legal and regulatory compliance; and • Reviewing the Company's policies on risk assessment and management. All members of the Audit Committee are financially literate and are independent, as defined in the New York Stock Exchange listing standards, and Ms. Helton is a financial expert, as defined by the Sarbanes-Oxley Act. | | Gary E. Costley(9) Dennis H. Ferro C. Daniel Gelatt Sandra L. Helton* Roger C. Hochschild(1) | | 9 | ||||||||||
| | | | | | | | ||||||||||
| Human Resources | | • Evaluating the performance of the CEO and determining his compensation • Approving compensation for all other officers of the Company and Principal Life at the level of Senior Vice President and above officers ("Executives"); • Approving employment, severance or change of control agreements and perquisites for Executives; • Overseeing Executive development and succession planning; • Approving salary and employee compensation policies for all other employees; • Administering the Company's • Acting on management's recommendations • Reviewing compensation programs to confirm that | | Betsy J. Bernard(2) Gary E. Costley(1,9) Michael T. Dan* C. Daniel Gelatt Roger C. Hochschild(1) Elizabeth E. Tallett | | 6 | ||||||||||
| | | | | | | | ||||||||||
| Nominating and Governance | | • Recommends Board candidates, Board committee assignments and service as Lead and Alternate Lead Director; • Reviews and reports to the Board on Director independence, performance of individual Directors, process for the annual self evaluations of the Board and its performance and committee self evaluations, content of the Global Code of Business Conduct and Ethics, Director compensation, and the Corporate Governance Guidelines; • Reviews environmental and corporate social responsibility matters as well as the Company's political contribution activities. | | Betsy J. Bernard* Jocelyn Carter-Miller Michael T. Dan(1) Blair C. Pickerell(3) Elizabeth E. Tallett | | 5 | ||||||||||
| | | | | | | |
| | | 2016 Proxy Statement15 |
| Committee | | Responsibilities | | Members (*Committee Chair) | | Meetings Held in | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | |||||||||||
| Finance | | • Assists the Board with • Reviews capital structure and • Oversees investment policies, strategies and | ||||||||||||||
| | Betsy J. Bernard(1) Jocelyn Carter-Miller* Gary E. Costley(2) Dennis H. Ferro Blair Pickerell(3) | | 8 | |||||||||||||
| | | | | | ||||||||||||
| Strategic Issues | | Plans the | | Gary E. Costley(8) Dennis H. Ferro*(5) C. Daniel Gelatt*(6) Roger C. Hochschild(7) Blair C. Pickerell(7) | | 4 | ||||||||||
| | | | | | | | ||||||||||
| Executive | | | Betsy J. Bernard Sandra L. Helton Daniel J. Houston(4) Elizabeth E. Tallett Larry D. Zimpleman(9)* | | None | |||||||||||
| | | | | | | |
| 162016 Proxy Statement | | |
Directors serve on the Boards of the Company, Principal Life and Principal Financial Services, Inc. Directors who are also employees do not receive any compensation for their service as Directors. The Company provides competitive compensation to attract and retain high quality Directors. A substantial proportion of Director compensation is provided in the form of equity to help align Directors' interests with the interests of shareholders.
The Director compensation program is reviewed annually. The Nominating and Governance Committee uses the Board's independent compensation consultant, Frederic W. Cook & Co., Inc. ("Cook") to conduct a comprehensive review and assessment of Director compensation. Cook last reviewed Director compensation in November of 2015. The Company targets Director compensation at approximately the median of the peer group used for Executive compensation comparisons ("Peer Group") (see page 26), which aligns with its Executive compensation philosophy. As a result of that review and the Committee's discussion, no changes were made to the Board compensation program, except with respect to the nonexecutive Chairman, as detailed below.
| | | |
| | Effective Since January 1, 2015 | |
| | | |
| Annual Cash Retainers(1) | | |
| | | |
| - Board | | $95,000 |
| | | |
| - Audit Committee Chair | | $20,000 |
| | | |
| - Human Resources Committee Chair | | $17,500 |
| | | |
| - Finance Committee Chair | | $15,000 |
| | | |
| - Nominating & Governance Committee Chair | | $15,000 |
| | | |
| - Other Committee Chairs | | $5,000 |
| | | |
| - Lead Director | | $25,000 |
| | | |
| Annual Restricted Stock Unit Retainer(2) | | |
| | | |
| - Board | | $130,000 |
| | | |
| Meeting Attendance Fees | | |
| | | |
| - Regularly Scheduled Board Meeting | | No meeting fees |
| | | |
| - Non-regularly Scheduled Board Meetings (in person) | | $2,500 per day |
| | | |
| - Non-regularly Scheduled Board Meetings (Telephonic) | | $1,000 |
| | | |
| - Committee Meeting | | $1,500 |
| | | |
| - Telephonic Committee Meeting | | $1,000 |
| | | |
Effective January 4, 2016, Mr. Zimpleman became a non executive Chairman of the Board, and he will be paid an annual retainer of $200,000 for this service, in addition to the normal compensation provided to non-employee members of the Board, both prorated for the period January 1 - May 17, 2016.
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Fees Earned by Directors in 2015
| | | | | | | | | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | |||||
| Name | | Fees Earned or Paid in Cash | | Stock Awards(1) | | Total | | |||||
| | | | | | | | | |||||
| Betsy J. Bernard | | | $ | 132,000 | | | $ | 129,990 | | $ | 261,990 | |
| | | | | | | | | |||||
| Jocelyn Carter-Miller | | | $ | 133,000 | | | $ | 129,990 | | $ | 262,990 | |
| | | | | | | | | |||||
| Gary E. Costley | | | $ | 119,000 | | | $ | 129,990 | | $ | 248,990 | |
| | | | | | | | | |||||
| Michael T. Dan | | | $ | 130,000 | | | $ | 129,990 | | $ | 259,990 | |
| | | | | | | | | |||||
| Dennis H. Ferro | | | $ | 127,500 | | | $ | 129,990 | | $ | 257,490 | |
| | | | | | | | | |||||
| C. Daniel Gelatt Jr. | | | $ | 123,500 | | | $ | 129,990 | | $ | 253,490 | |
| | | | | | | | | |||||
| Sandra L. Helton | | | $ | 142,000 | | | $ | 129,990 | | $ | 271,990 | |
| | | | | | | | | |||||
| Roger C. Hochschild | | | $ | 126,943 | | | $ | 145,143 | | $ | 272,086 | |
| | | | | | | | | |||||
| Richard L. Keyser | | | $ | 6,000 | | | $ | 0 | | $ | 6,000 | |
| | | | | | | | | |||||
| Luca Maestri | | | $ | 6,000 | | | $ | 0 | | $ | 6,000 | |
| | | | | | | | | |||||
| Blair C. Pickerell | | | $ | 83,189 | | | $ | 97,866 | | $ | 181,055 | |
| | | | | | | | | |||||
| Elizabeth E. Tallett | | | $ | 139,000 | | | $ | 129,990 | | $ | 268,990 | |
| | | | | | | | | |||||
Directors' Deferred Compensation Plan
Directors may defer the receipt of their cash compensation under the Deferred Compensation Plan for Non-Employee Directors of Principal Financial Group, Inc. This Plan has four investment options:
All of these funds are available to participants in Principal Life's Excess Plan. The returns realized on these funds during 2015 are listed in the table, "Qualified 401(k) Plan and Excess Plan," on pages 44-45.
Directors receive an annual grant of Restricted Stock Units ("RSUs"). The grant made in 2015 was made under the Principal Financial Group, Inc. 2014 Directors Stock Plan. RSUs are granted at the time of the annual meeting, vest at the next annual meeting and are deferred until at least the date the Director leaves the Board. At payout, the RSUs are converted to shares of Common Stock. Dividend equivalents become additional RSUs, which vest and are converted to Common Stock at the same time and to the same extent as the underlying RSU. The Nominating and Governance Committee has the discretion to make a prorated grant of RSUs to Directors who join the Board at a time other than at the annual meeting. While the 2014 Director Stock Plan (which was approved by shareholders) affords some discretion in determining the dollar value of RSUs that may annually be awarded to each non-employee Director, it imposes a maximum limit of $230,000 ($500,000 for an Independent Chairman) on the size of the annual award that may be made to any non-employee Directors.
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As of December 31, 2015, each Director had the following aggregate number of outstanding RSUs as a result of Director compensation in 2015 and prior years, including additional RSUs as the result of dividend equivalents:
| | ||
|---|---|---|
| | | |
| Director Name | | Total RSUs Outstanding Fiscal Year End 2015 (Shares) |
| | | |
Betsy J. Bernard | | 34,373 |
| | | |
Jocelyn Carter-Miller | | 36,345 |
| | | |
Gary E. Costley | | 34,373 |
| | | |
Michael T. Dan | | 31,913 |
| | | |
Dennis H. Ferro | | 19,397 |
| | | |
C. Daniel Gelatt | | 39,139 |
| | | |
Sandra L. Helton | | 34,373 |
| | | |
Roger C. Hochschild | | 2,839 |
| | | |
Richard L. Keyser | | 0 |
| | | |
Luca Maestri | | 0 |
| | | |
Blair C. Pickerell | | 1,725 |
| | | |
Elizabeth E. Tallett | | 38,651 |
| | | |
Principal Life matches charitable gifts up to an annual amount of $16,000 per nonemployee Director. These matching contributions are available during a Director's term and the following three years. Principal Life receives the charitable contribution tax deductions for the matching gifts.
Directors are reimbursed for travel and other business expenses they incur while performing services for the Company. Directors' spouses/partners may accompany them to the annual Board strategic retreat. Principal pays for some of the travel expenses and amenities for Directors and their spouses/partners, such as meals and social events. Directors are also covered under the Company's Business Travel Accident Insurance Policy and Directors' and Officers' insurance coverage. In 2015 the total amount of perquisites provided to nonemployee Directors was less than $10,000 in all cases.
Directors' Stock Ownership Guidelines
To encourage Directors to accumulate a meaningful ownership level in the Company, the Board has had a "hold until retirement" stock ownership requirement since 2005. All RSU grants must be held through a Director's service on the Board, and may only be converted to Common Stock when the Director's Board service ends. The Board has a guideline that Directors own interests in Common Stock equal to five times the annual Board cash retainer within five years of joining the Board. Directors have been able to achieve this level of ownership through the RSU hold until retirement requirement. Once this guideline is met, Directors will not need to make additional share purchases if the guideline is no longer met due to a reduction in stock price, as long as the Director's ownership level is not reduced as a result of share sales.
The Audit Committee oversees the Company's financial reporting process. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The Committee reviewed with management the audited financial statements for the fiscal year ended December 31, 2012, including a discussion of2015, and discussed the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.
The Committee discussed with Ernst & Young LLP, the Company's independent auditor, the matters required to be discussed by Statement on Auditing Standards ("SAS") 114,The Auditor's Communication with
those Charged with Governance,, as adopted by the Public Company Accounting Oversight Board (United States) ("PCAOB") in Rule 3200T. SAS 114 requires the independent auditor to communicate (i) the auditor's responsibility under standards of the PCAOB; (ii) an overview of the planned scope and timing of the audit; and (iii) significant findings from the audit, including the qualitative aspects of the entity's significant accounting practices;practices, significant difficulties, if any, encountered in performing the audit;audit, uncorrected misstatements identified during the audit,
| | | 2016 Proxy Statement19 |
other than those the auditor believes are trivial, if any;any, any disagreements with management;management, and any other issues arising from the audit that are significant or relevant to those charged with governance.
The Committee received from Ernst & Young LLP the written disclosures and letter required by applicable requirements of the PCAOB regarding the independent auditor's communications with the Committee concerning independence. The Committee has discussed with Ernst & Young LLP its independence and Ernst & Young LLP has confirmed in its letter that, in its professional judgment, it is independent of the Company within the meaning of the federal securities laws.
The Committee discussed with the Company's internal and independent auditors the overall scope and plans for their respective audits. The Committee meets with the internal and independent auditors, with and without management present, to discuss the results of their examinations, their evaluations of the Company's internal controls and the overall quality of the Company's financial reporting.
In reliance on the reviews and discussions referred to above, the Committee recommended to the Board (and the Board approved) that the audited financial statements be included in the Company's Annual Report on Form 10-K for the year ended December 31, 2012,2015, for filing with the SEC. The Committee has also approved, subject to shareholder ratification, the appointment of Ernst & Young LLP as the Company's independent auditors for the fiscal year ending December 31, 2013.2016.
The Committee does not have the responsibility to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and in accordance with generally accepted accounting principles. That is the responsibility of the Company's independent auditor and management. In giving our recommendation to the Board, the Committee has relied on (i) management's representation that such financial statements have been prepared with integrity and objectivity and in conformity with generally accepted accounting principles, and (ii) the report of the Company's independent auditor with respect to such financial statements.
Sandra L. Helton, Chair
Gary E. Costley
Dennis H. Ferro
C. Daniel GelattLuca MaestriRoger C. Hochschild
| 202016 Proxy Statement | | |
Director Qualifications, Process for Identifying and Evaluating Director Candidates and Diversity of the Board
The Committee regularly assesses the appropriate mix of skills and characteristics of Directors in light of the current make up of the Board and the Company's needs. The Committee periodically uses an outside consultant to help the Committee evaluate the expertise, backgrounds and competencies of the Directors in view of the current strategic initiatives and risk factors of the Company. The results of these assessments provide direction in searches for Board candidates.
Individual performance reviews are conducted for Directors who are eligible for re-nomination at the next annual meeting. These reviews assess Directors' contributions, present occupation and other commitments. The Committee has used outside firms to assist the Committee with these Director evaluations.
In Director and candidate evaluations, the Committee assesses personal and professional ethics, integrity, values, expertise and ability to contribute to the Board. The Board values experience as a current or former CEO or other senior executive, in financial services, in international business and with financial management or accounting responsibilities. The following competencies are also sought: strategic orientation,
results-orientation and comprehensive decision-making. Directors' terms must end prior to the annual meeting following their 72nd birthday.
All Board members have:
Several Directors have led businesses or major business divisions as CEO or President (Ms. Bernard, Dr. Costley, Mr. Dan, Mr. Ferro, Dr. Gelatt, Mr. Keyser, Mr. Maestri and Ms. Tallett). The following chart shows areas central to the Company's strategy, initiatives and operations for which Directors have specific training and executive-level experience that assists them in their responsibilities.
Diversity of the Board is a valued objective. The Nominating and Governance Committee reviews the Board's needs and diversity in terms of race, gender, national origin, backgrounds, experiences and areas of expertise. The Board recognizes that diversity is an important factor in Board effectiveness, which is apparent by the Board's selection of Directors. The Board does not have a formal diversity policy. The Company's culture and commitment to diversity has been recognized by organizations such as the National Association of Female Executives, the Human Rights Campaign Corporate Equality Index, 2020 Women on Boards campaign and LATINAStyle magazine. The Board's effectiveness benefits from Directors who have the skills, backgrounds and qualifications needed by the Board and who also increase the Board's diversity.
The Committee will consider shareholder recommendations for Director candidates sent to the Nominating and Governance Committee, c/o the Corporate Secretary. Director candidates nominated by shareholders are evaluated in the same manner as Director candidates identified by the Committee and search firms it retains.
DIRECTORS' COMPENSATION
Directors serve on the Boards of the Company, Principal Life and Principal Financial Services, Inc. Directors who are also employees do not receive any compensation for their service as Directors. The Company provides competitive compensation to attract and retain high-quality Directors. A substantial proportion of Director compensation is provided in the form of equity to help align Directors' interests with the interests of shareholders.
The Director compensation program is reviewed annually. The Nominating and Governance Committee uses the Board's independent compensation consultant, Frederic W. Cook & Co., Inc. ("Cook") to conduct a comprehensive review and assessment of Director compensation. Cook reviewed Director compensation in August of 2012. As a result of that review and the Committee's discussion, the Committee recommended to the Board that no changes be made to the program at that time. The Board last changed the Director compensation program in November of 2011. The Company targets Director compensation at approximately the median of the Peer Group (see page 33), which aligns with its Executive compensation philosophy.
The following chart shows the Director fees effective January 1, 2012 which remain in effect:
Fees Earned by Directors in 2012
The following table summarizes the compensation earned by Directors in 2012.
| | Director Name | | Fees Earned or Paid in Cash | | Stock Awards (1) | | Total | | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Betsy J. Bernard | $126,000 | $114,992 | $240,992 | |||||||||||||
| Jocelyn Carter-Miller | $131,000 | $114,992 | $245,992 | |||||||||||||
| Gary E. Costley | $118,000 | $114,992 | $232,992 | |||||||||||||
| Michael T. Dan | $120,500 | $114,992 | $235,492 | |||||||||||||
| Dennis H. Ferro | $124,000 | $114,992 | $238,992 | |||||||||||||
| C. Daniel Gelatt | $113,500 | $114,992 | $228,492 | |||||||||||||
| Sandra L. Helton | $139,000 | $114,992 | $253,992 | |||||||||||||
| Richard L. Keyser | $108,000 | $114,992 | $222,992 | |||||||||||||
| Luca Maestri (2) | $145,000 | $143,489 | $288,489 | |||||||||||||
| Arjun Mathrani (3) | $6,000 | $0 | $6,000 | |||||||||||||
| Elizabeth E. Tallett | $134,000 | $114,992 | $248,992 |
Deferral of Cash Compensation
�� Directors may defer the receipt of their cash compensation under the Deferred Compensation Plan for Non-Employee Directors of Principal Financial Group, Inc. This Plan has four investment options:
All of these funds are available to participants in Principal Life's Excess Plan. The returns realized on these funds during 2012 are listed in the table, "Qualified 401(k) Plan and Excess Plan," on pages 50-51.
Restricted Stock Unit Grants
Directors receive an annual grant of restricted stock units ("RSUs") pursuant to the Principal Financial Group, Inc. 2005 Directors Stock Plan. RSUs are granted at the time of the annual meeting, vest at the next annual meeting and are deferred until at least the date the Director leaves the Board. At payout, the RSUs are converted to shares of Common Stock. Dividend equivalents become additional RSUs, which vest and are converted to Common Stock at the same time and to the same extent as the underlying RSU. The Nominating and Governance Committee has the discretion to make a prorated grant of RSUs to Directors who join the Board other than at the annual meeting.
As of December 31, 2012, each Director had the following aggregate number of outstanding stock options and restricted stock units as a result of Director compensation in 2012 and prior years, including additional RSUs as the result of dividend equivalents:
| | Director Name | | Total Stock Options Outstanding Fiscal year End 2012 (shares)(1) | | Total RSUs outstanding Fiscal Year End 2012 (shares) | | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Betsy J. Bernard | 3,820 | 23,944 | ||||||||||
| Jocelyn Carter-Miller | 3,820 | 25,765 | ||||||||||
| Gary E. Costley | 3,820 | 23,944 | ||||||||||
| Michael T. Dan | 0 | 21,673 | ||||||||||
| Dennis H. Ferro | 0 | 10,117 | ||||||||||
| C. Daniel Gelatt | 3,820 | 28,344 | ||||||||||
| Sandra L. Helton | 3,820 | 23,944 | ||||||||||
| Richard L. Keyser | 3,820 | 27,894 | ||||||||||
| Luca Maestri | 0 | 5,896 | ||||||||||
| Arjun Mathrani | 3,820 | 0 | ||||||||||
| Elizabeth E. Tallett | 3,820 | 27,894 |
Director Perquisites and Reimbursement of Expenses
Directors are reimbursed for travel and other business expenses they incur while performing services for the Company.
Principal Life matches charitable gifts up to an annual amount of $6,000 per non-employee Director, and Directors' contributions to the United Way are also matched up to $10,000 per year. These matching contributions are available during a Director's term and the following three years. Principal Life receives the charitable contribution tax deductions for the matching gifts.
Directors' spouses/partners may accompany them to the annual Board strategic retreat. The Company pays for some of the travel expenses and amenities for Directors and their spouses/partners, such as meals and social events. In 2012, the Company paid for one non-employee Director's hotel expense for attending the Principal Charity Classic, a golf tournament sponsored by the Company that donates to children's charities. The Company supplied iPads to some Directors as part of moving to electronic delivery of Board materials and the value was reported to those Directors as income. Directors are also covered under the Company's Business Travel Accident Insurance Policy and Directors' and Officers' insurance coverage.
In 2012, the total amount of perquisites provided to non-employee Directors was less than $10,000 in all cases.
Directors' Stock Ownership Guidelines
To encourage Directors to accumulate a meaningful ownership level of Company stock, the Board has had a "hold until retirement" stock ownership requirement since 2005. All RSU grants must be held through a Director's service on the Board, and may only be converted to common shares when the Director's Board service ends. The Board has a guideline that Directors own interests in Common Stock equal to five times the annual Board cash retainer within five years of joining the Board. Directors have been able to achieve this level of ownership through the RSU "hold until retirement" requirement. Once this guideline is met, Directors will not need to make additional share purchases if the guideline is no longer met due to a reduction in stock price, as long as the Director's ownership level is not reduced as a result of share sales.
Current Directors have met the ownership requirement except Mr. Maestri who was elected to the Board in February of 2012.
EXECUTIVE COMPENSATION
| Contents: | | Page | ||||||
| Compensation Discussion & Analysis | | 21 | ||||||
• Our Performance in | | |||||||
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• Compensation Program Philosophy and Policies | | |||||||
• Summary of Compensation Elements | | |||||||
• How we make | | |||||||
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• Base Salary | | |||||||
• Annual Incentive Pay | | |||||||
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• Timing of Stock Option Awards and Other Equity Incentives | | |||||||
• Benefits | | |||||||
• Change of Control & Separation Pay | | |||||||
• Perquisites | | |||||||
• Stock Ownership Guidelines | | |||||||
• Claw Back Policy | | |||||||
• Trading Policy | | |||||||
• Succession Planning | | |||||||
• Human Resources Committee Report | | |||||||
• Risk Assessment | | |||||||
Compensation Tables | | |||||||
• Summary Compensation Table | | |||||||
• Grants of Plan Based Awards Table | | |||||||
• Outstanding Equity Awards Table | | |||||||
• Option Exercises and Stock Vesting Table | | |||||||
• Pension Benefits | | |||||||
• Potential Payments Upon Termination Related to Change of Control | |
Compensation Discussion and Analysis (CD&A)
The CD&A describes Principal Financial Group's executiveGroup, Inc.'s Executive compensation objectives, and philosophy. It also describes our 20122015 compensation program and reviews the outcomes, including the Company's financial performance in 2012. Management prepared the CD&A on behalf2015. Our "Named Executive Officers" in 2015 are listed below. Talent and succession planning are a critical part of the Human Resources Committee ("Committee"). The Committee then reviewed itBoard's responsibilities. In 2015, Larry Zimpleman announced his retirement, and, provided its approval. Our Named Executive Officers in 2012 were:as part of the planned succession process, Daniel J. Houston was promoted to the position of CEO. Effective May 17, 2016, Mr. Houston will also be Chairman of the Board.
| | | 2016 Proxy Statement21 |
He was President, Retirement and Investor Services from February 2008 until January 2010, and was Executive Vice President, Retirement and Investor Services of the Company from June 2006 to February 2008.
2015 Company in 1995, and has been President, Principal International since March 2011. Prior to his current position, he was Senior Vice President and President — Principal Financial Group Latin America since March 2010, and was Vice President — Principal International of Principal Life from 2000 until March 2010.
Our performance in 2012
Highlights:
Corporate highlights include:
In 2015, 93% of our investment options were above median for five-year performance at year-end, 2011
Divisional highlights include:
We also saw the growth potential (and diversification benefits) of strong net cash flows and strong investment performance.
The Company maintains a strong capital position and finished 2012 with $2.5 billion of excess capital ($1.5 billion was earmarked for Cuprum which closed in February 2013). In 2012, the Company allocated more than $2 billion to common stock dividends, strategic acquisitions, and share repurchase. As evidence of further implementing our strategy, we announced two significant acquisitions in Latin America (Claritas and Cuprum), solidifying our position as a retirement leader in the fast-growing emerging markets in this region.
In 2012,2015, the Company's total shareholder return was lower thanslightly above the average of our peer groupPeer Group used for compensation purposes (19%(–10.5% vs. 28%–16.6%). However, our 3-yearOur three year total shareholder return also continues to be higher, with a 3-yearthree year total shareholder return of 27%71%, compared to an average total shareholder return of 14%42% for companies in the peer group.Peer Group.
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*Excludes The Hartford Financial, StanCorp, and Janus as they were removed from our Peer Group in 2015.
2012 2015 Compensation Highlights
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Compensation Program Philosophy and Policies
Compensation Philosophy – —our compensation programs are designed to:
Compensation Policies – —Principal's executiveExecutive compensation program incorporates the following best practices:
| | | 2016 Proxy Statement23 |
Summary of Compensation Elements:
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| | | Compensation Component | | | | Objective | | | | Description and | | |
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | |
| Base Salary | | | Provides fixed income based on the size, scope and complexity of the Executive's role, Executive's historical performance and relative position compared to market pay information | | | Base salaries are generally targeted at market median, but may vary from median based on the Executive's performance, work experience, role and the difficulty of replacing the Executive. In | | ||||
| | | | | | | | | | | | | |
| Annual Incentive Compensation | | | Motivates and rewards annual corporate performance as well as the Executive's contribution to achieving our annual objectives. | | | A range of earnings opportunity, expressed as percentages of base salary and corresponding to three levels of performance (threshold, target and maximum), is established for each Based on the Committee's assessment of performance, actual bonuses for | | ||||
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| Long Term Incentive Compensation | | | Motivates and rewards | | | Each year, the Committee establishes the The PSUs vest based on The PSUs granted in The PSUs granted in | | ||||
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| 242016 Proxy Statement | | |
1 Adjusted for the third quarter assumption review and costs related to the Cuprum transaction.
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| | | Compensation Component | | | | Objective | | | | Description and | | | |||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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| | Benefits | | | | Named Executive Officers participate in most of the same benefit plans as the Company's other | | |||||||||
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| | Perquisites | | | Modest amount of additional benefits to help attract and retain Executive talent and enable Executives to focus on Company business with minimal disruption. | | | Executives are eligible for one physical examination per | | |||||||
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| | Termination Benefits | | | | | | |||||||||
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How We Make Compensation Decisions
We use a formal decision-making and review process that incorporates proper oversight, benchmarking against peers, independent advice, an annual decision-making cycle and the use of board discretion when appropriate.
Human Resources Committee Involvement
The Human Resources Committee oversees the development and administration of the Company's compensation and benefits policies and programs, approves of all aspects of the compensation program and compensation for Executives, and makes the compensation decisions for the CEO. In addition, the Human Resources Committee:
Each yearCook advises the CEO, with input from the Human Resources Department and Cook, recommends the amount of base salary increase (if any), annual incentive award and the long term incentive award for Executives (other than himself). These recommendations are basedCommittee on the Executive's performance, the performance of the business areas for which the Executive is responsible (if applicable) and considerations such as retention. The Human Resources Committee reviews these recommendations and approves compensation decisions.
The CEO takes no part in determining his own compensation. The Human Resources Committee consults with the other independent Directors regarding the CEO's performance and then determines the compensation earned by the CEO for the current year and the CEO's compensation opportunity for the following year.
The role of the Independent Compensation Consultant & Interaction with Management
The Committee has the sole authority to hire, approve the compensation and terminate the engagement of the compensation consultant.
The Committee engaged the consulting firm of Frederic W. Cook & Co., Inc. ("Cook") to advise it on the Company's Executive compensation program. Cook also advises the Nominating and Governance Committee on compensation for non-employee Directors.nonemployee Directors (see pages 17-19). Cook receives compensation from the Company only for its work in advising these Committees. Cook does not and would not be allowed to perform services for management. The Committee assessed the independence factors in applicable SEC rules and NYSE Listing Standards and other facts and circumstances and concluded that the services performed by Cook did not raise any conflictsconflict of interest.
Each year the CEO, with input from the Human Resources Department and Cook, recommends the amount of base salary increase (if any), annual incentive award and the long term incentive award for Executives other than himself. These recommendations are based on the Executive's performance, performance of the business areas for which the Executive is responsible (if applicable) and other considerations such as retention. The Human Resources Committee reviews these recommendations and approves compensation decisions for Executives.
No member of management, including the CEO, has a role in determining his or her own compensation. The Human Resources Committee consults with the other independent Directors regarding the CEO's performance and then determines the compensation earned by the CEO for the current year and the CEO's compensation opportunity for the following year.
The role of the Independent Compensation Consultant & Interaction with Management
The Committee has the sole authority to hire, approve the compensation of and terminate the engagement of the compensation consultant.
| | | 2016 Proxy Statement25 |
Cook conducts a comprehensive review of the Company's Executive compensation program every other year. In the years in which Cook does not conduct a compensation study, the Committee makes compensation decisions, based, in part, on survey data provided by the Human Resources Department and input provided by Cook.
A comprehensive study was undertaken by Cook in 20112015 which influenced the Committee's decisions for the 2012 Executive2016 executive compensation program. The study reviewed all aspects of the design and structure of the Company's total Executive compensation program, including:and included:
The most recent review process included:
The goals of the review are to assist the Committee in:Cook also:
Cook also:
Use of Compensation Data
The Committee reviews the groupPeer Group of companies it uses to compare Executive compensation (the "Peer Group") every other year as part of Cook's biennial study. Cook recommends an appropriate Peer Group of public, similarly-sized,similarly sized, diversified financial services, insurance and asset management companies. Cook's recommendations takecompanies, taking into account the Company's and the competitors' strategy, mix of business and size, as measured primarily by annual revenues, market capitalization and total assets. These companies are the major competitors in one or more of the Company's businesses, but none represent the exact business mix of the Company. Some of these companies have higher or lower market capitalization and revenue than the Company. The CompanyPrincipal. Principal targets compensation for the Named Executive Officers at the median of the compensation of the named executive officers at the Peer Group companies. As a result of the most recent review, a decision was made to omit Hartford Financial Services due to its business mix and Janus Capital Group and StanCorp Financial as they are much smaller than Principal. Voya Financial was added, as it is similar in size and has a similar business mix as Principal. The companies in the Peer Group used in Cook's 20112015 analyses to assist in decisions on 20122016 compensation were:
| | | | | |
• Affiliated Managers Group | | • Invesco | | • MetLife |
• Ameriprise Financial | | •
| | • Prudential Financial |
• Eaton Vance | | •
|
| |
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Lincoln National | | • Sun Life Financial | |
•
| | • ManuLife | | • T. Rowe Price |
| | | • Voya Financial | ||
| | | | | |
The Committee also uses annual data from third party industry surveys for additional context for its compensation decisionsdecisions.2(2). Further, every two to three years, the Company's non-cashnon cash benefit programs are compared with those of more than 100 diversified financial services companies. This is a larger group than the Peer Group because the information is used in designing and evaluating our broad-basedbroad based employee benefit programs. Benefit programs are also compared against those of local employers in Des Moines, Iowa due to the Company's significant employee population there.
Each year, the Committee reviews the total compensation paid to the Executives by reviewing tally sheets, which include:
The Committee uses this information to analyze the value of compensation actually delivered versus the compensation opportunities established by the Committee, and it is also used in making compensation and compensation plan design decisions. The Committee made no compensation adjustments as a result of the analysis in 2012 because the program continues to meet the Company's objectives.
2012 Executive Compensation Decisions
The Committee made compensation decisions for the Named Executive Officers based on the following factors:
Each year, the Committee reviews the total compensation paid to the Executives by reviewing tally sheets, which include: The Committee uses this information to analyze the value of compensation actually delivered versus the compensation opportunities established by the Committee, and it is also used in making compensation and compensation plan design decisions. The Committee did not make any changes to the Executive compensation program in 2015 because it continues to meet the Company's objectives. 2015 Executive Compensation Decisions The Committee made compensation decisions for the Named Executive Officers based on: The Committee also considers the tax and accounting consequences of each element of compensation, and tries to maximize the tax deductibility to Principal of compensation under Section 162(m) of the Internal Revenue Code ("Tax Code"). This Tax Code section limits The chart below shows the Base Salary When determining base salary for each Executive, the Committee considers the Peer Group median for comparable executive positions as well as the survey data referenced above, the Executive's performance, work experience, the importance of the position to the Company and how difficult it would be to replace the Executive. The table below provides the historical base salaries Compensation The Named Executive Officers may earn annual cash bonuses under the Principal Financial Group, Inc. Annual Incentive Plan. This plan was approved by shareholders in 2004, and complies with Section162(m) of the Tax Code so that these incentives to Named Executive Officers are considered performance based and are therefore fully tax The maximum aggregate bonus amount for the Named Executive Officers is 2% of annual operating income ("Bonus Pool"). For The Committee sets the target and maximum annual incentive awards for each Named Executive Officer. The Committee Performance Goal Setting and Measurement Process The Board meets each September to review the Company's In determining corporate performance for In addition, Messrs. McCaughan and Valdés had operating earnings goals specific to the business units they oversee: • Retirement & Investor Services sales • Life sales • Specialty Benefits premium and fees • Principal Global Investors % growth in non-affiliated management fees • Mutual fund asset sales • Principal International net cash flow2The surveys used were the McLagan Investment Management survey, Towers Watson U.S. Financial Services Studies Executive Database, the Towers Watson Diversified Insurance Study of Executive Compensation. The names of the companies participating in these surveys are included in Appendix B.A.262016 Proxy Statement the CompanyPrincipal from deducting annual compensation exceeding $1,000,000 for our CEO and the three other most highly paid Named Executive Officers (other than our CFO) who are in office on the last day of the fiscal year ("Covered Employees"). There is an exception to this rule for performance-basedperformance based compensation. The Committee may provide compensation to Covered Employees that is not deductible if it determines, in its discretion, that it is appropriate to do so. For 2012,2015, Messrs. Zimpleman, Houston, Dunbar, McCaughan, and Valdés were Covered Employees. 2016 Proxy Statement27 2012 pay mix2015 target total compensation for our Named Executive Officers as well as the proportion of their compensation tied to the Common Share price.Company performance. The majority of compensation paid to our Named Executive Officer's is variable and at risk as reflected in the chart below.
1(1) of the Named Executive Officers. Named Executive Officer 2010 2011 2012 Percent Increase
2011 to 2012 Zimpleman $800,000 $900,000 $900,000 0.0% Lillis $400,000 $436,000 $475,000 8.9% Houston $400,000 $525,000 $550,000 4.8% McCaughan $548,500 $570,500 $600,000 5.2% Valdés — — $525,000 — Named Executive Officer 2013(1) 2014 2015 Percent Increase
2014 to 2015 Zimpleman $ 925,000 $ 1,000,000 $ 1,000,000 0% Houston $ 572,000 $ 675,000 $ 775,000 14.8%(2) Dunbar — — $ 473,000 5.4% Lillis $ 500,000 $ 530,000 $ 551,000 3.9% McCaughan $ 615,000 $ 634,000 $ 653,000 3.0% Valdés $ 546,000 $ 563,000 $ 580,000 3.0% deductible.deductible to the Company.282016 Proxy Statement 2012,2015, the maximum bonuses were: Named Executive Officer Maximum Award as
Percentage of the
Annual Incentive Pool Maximum
Potential Award
Payment CEO (Zimpleman)(Houston) 35% $ 5.610.4 million Second highest Paid Covered Employee (McCaughan) 30%25% $ 4.87.4 million Third highest Paid Covered Employee (Houston)(Valdés) 15%20% $ 2.45.9 million Fourth highest Paid Covered Employee (Valdés)(Dunbar) 10% 10% $ 1.63.0 million CFO (Lillis) 10% $ 1.63.0 million then usesmay use its negative discretion to reduce the awards actually payable. After this reduction, maximum annual incentive opportunities are generally 200% of the target annual incentive opportunity. The Committee approved the following target awards for Named Executive Officers in each of the past three years:
Annual Incentive Targets (as a percentage of base salary) Named Executive Officer 2010 2011 2012 Zimpleman 150% 150% 150% McCaughan 250% 250% 300% Houston 125% 125% 125% Valdés — — 75% Lillis 75% 75% 100% Named Executive Officer 2013 2014 2015 Zimpleman 175 % 200 % 200% Houston 125 % 200 % 350%(1) McCaughan 300 % 300 % 300% Dunbar — — 70% Valdés 75 % 75 % 75% Lillis 100 % 100 % 100% Mr. Zimpleman'sThe CEO's target award opportunity is greater than that of the other Named Executive Officers (except Mr. McCaughan's) because Mr. ZimplemanHouston (and previously Mr. Zimpleman) has overall responsibility for the Company and greater responsibilities than the other Named Executive Officers. The CEO's target award opportunity has increased over time to better align his compensation with CEOs in the Peer Group. The target award opportunity for Mr. McCaughan was established by the Committee to be competitive with award opportunities of senior executives within asset management firms.firms, which tend to be higher than target annual incentive opportunities in other industry segments. In establishing the target bonusaward opportunity for Messrs. Houston,Dunbar, Valdés and Lillis, the Committee considered the median incentive targets for comparable executive positions in the Peer Group companies, as well as the survey data referenced above.long-termlong term strategy. In November, the CEO, CFO and Division Presidents recommend preliminary financial goals for the Company and business units and strategic initiatives for the next year. The Finance Committee reviews the proposed goals, underlying assumptions of the goals and initiatives, key drivers of financial performance, trends and business opportunities and advises the Board and Human Resources Committee on the appropriateness of the financial goals. The Human Resources Committee reviews and approves the final goals for the Company, the CEO and the other Executives with input from the Finance Committee and Board based on year-endprior year end financial results. All employees develop individual performance goals with their leaders that support the Company's goals. TheFollowing the completion of fiscal 2015, the Committee reviewed 2015 performance on several key financial measures and on corporate and divisional goals to determine the 2015 annual bonus for Named Executive Officers. The Committee does not use any particular weighting for these goals; these measures are used as guideposts when the Committee exercises its discretion in its subjective evaluation of these factors. 2016 Proxy Statement29 2012,2015, the Committee reviewed Company achievements on these key financial goals: Goal 2012 Assessment 1. Achieve appropriate operating earnings and earnings per share. One of management's responsibilities is to lead the Company in achieving its goals for operating earnings and earnings per diluted share. For 2012, the target for operating earnings was $925 million and the target for earnings per diluted share was $3.07. For incentive compensation purposes, operating earnings were adjusted to $905 million and EPS to $3.01. In addition, Messrs. Houston, McCaughan and Valdés had operating earnings goals specific to the business units they oversee: Named Executive Officer Operating
Earnings Goal Operating
Earnings Result Houston • Retirement & Investor Services $570 million $575 million • US Insurance Solutions $225 million $138.2 million McCaughan – Principal Global Investors $90 million $81.2 million Valdés- Principal International $170 million $153 million 2. Capital – maintain a targeted National Association of Insurance Commissioners ("NAIC") risk based capital ratio above 350%. At year-end, the NAIC risk based capital ratio was 415%. 3. Minimize credit loss A metric was established to measure whether the Company's invested assets (Principal Life's General Account) are appropriately managed. Ranges were established for after-tax credit losses for bond credit losses (20 – 30 basis points) and commercial mortgage loans (5 – 15 basis points). Actual 2012 after-tax credit losses for bond credit losses were 19 basis points and for mortgage loans, 9 basis points. 4. Achieve identified sales growth targets Business Unit Target Result Houston • Retirement & Investor Services Sales $23.4 billion $27.8 billion • Life Sales $233.0 million $227.1 million • Specialty Benefits premium and fees $1.48 billion $1.44 billion McCaughan • Principal Global Investors % growth in non-affiliated management fees 15% 15% Valdés • Principal International net cash flow $8.46 billion $13.5 billion Goal 2015 Assessment 1. Achieve appropriate operating earnings and earnings per share ("EPS"). One of management's responsibilities is to lead the Company in achieving its goals for operating earnings and earnings per diluted share. For 2015, the target for operating earnings was $1,350M and the target for earnings per diluted share was $4.50. Actual 2015 operating earnings were $1,270.5M and EPS was $4.26. Named Executive Officer Operating
Earnings Goal Operating
Earnings Result McCaughan—Principal Global Investors $130M $128M Valdés—Principal International $265M $220M 2. Capital—maintain a targeted National Association of Insurance Commissioners ("NAIC") risk based capital ratio in the range of 415%-425% At year end, the NAIC risk based capital ratio was maintained within the target range. 3. Minimize credit loss. A metric was established to measure whether the Company's invested assets (Principal Life's General Account) was appropriately managed. Ranges were established for after-tax bond credit losses and losses on commercial mortgage loans. Measure Goal Actual Result Bond credit losses 7-10 basis points 5 basis points Commercial mortgage loan losses 3-5 basis points 2 basis points 4. Achieve identified sales targets which require appropriate growth. The Company had 2015 sales growth goals as outlined below, by business area: Business Unit Target Result Houston $11,700M $8,774.2M $205M $170.7M $320M $314.2M McCaughan 9.0% 4.1% $21,550M $22,356.5M Valdés $13,001.3M $9,342.7M 302016 Proxy Statement
Final Annual Incentive Pay Award Determination
The following table shows the annual incentive award for each of the Named Executive Officers.Officers whose annual incentive opportunities are determined under the Annual Incentive Plan. The column "Reduction from Maximum Award" shows the amount by which the Committee reduced the maximum bonuses to the awards paid.
| | Named Executive Officer | | 2012 Salary Earned | | 2012 Target | | Final Award | | % of Target | | Reduction from Maximum Award | | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zimpleman | $900,000 | 150% | $1,282,500 | 95% | $4,317,500 | |||||||||||||||||||
| Lillis | $466,000 | 100% | $443,000 | 95% | $1,157,000 | |||||||||||||||||||
| Houston | $544,231 | 125% | $612,000 | 90% | $1,788,000 | |||||||||||||||||||
| McCaughan | $593,192 | 300% | $1,602,000 | 90% | $3,198,000 | |||||||||||||||||||
| Valdés | $519,231 | 75% | $370,000 | 95% | $1,230,000 |
| | | | | | | | | | | | | ||||
| Name | | 2015 Salary | | 2015 Target | | Final Award | | % of Target | | Reduction From Maximum Award | | ||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | ||||
Houston | | $ | 775,000 | | 350% | (1) | $ | 1,482,000 | | 80% | | | $ | 8,891,300 | |
| | | | | | | | | | | | | ||||
Lillis | | $ | 551,000 | | 100% | | $ | 440,000 | | 80% | | | $ | 2,523,800 | |
| | | | | | | | | | | | | ||||
Dunbar | | $ | 473,000 | | 70% | | $ | 278,000 | | 84% | | | $ | 2,685,800 | |
| | | | | | | | | | | | | ||||
McCaughan | | $ | 653,000 | | 300% | | $ | 1,563,000 | | 80% | | | $ | 5,846,500 | |
| | | | | | | | | | | | | ||||
Valdés | | $ | 580,000 | | 75% | | $ | 329,000 | | 76% | | | $ | 5,598,600 | |
| | | | | | | | | | | | | ||||
Executives may defer annual awards into a nonqualified supplemental savings plan ("Excess Plan"), as illustrated in the footnote to the Non Equity Incentive Compensation column of the Summary Compensation Table, on pages 42-43.36-38.
Long-term Long term Incentive Compensation
The long term incentive compensation program is designed to align the interests of Executives and shareholders. The compensation the Executives receive reflects the degree to which multi-yearmultiyear financial objectives are achieved and shareholder value is increased. The long term focus of the compensation programs supports the Company's businesses in which long term performance is critical, such as retirement products, life insurance and asset management. The long term incentive compensation program also encourages collaboration among Executives in pursuing corporate-widecorporate wide goals.
The Committee establishes a target long term incentive award opportunity for each Named Executive Officer stated as a percentage of each Executive'sNamed Executive Officer's base salary based on Peer Group and survey data, and on the advice of its independent compensation consultant. The Committee uses the following factors to adjust the target award and determine the actual award to be awardedgranted to each Named Executive Officer ("Award Granted"):
The compensation ultimately received by ExecutivesNamed Executive Officers may vary considerably from the grant-dategrant date fair value of the Award Granted, due to the Company's performance and changes in share price that occur after the grant.
| Long-Term Incentive Target & Grant (as % of base salary) | ||||||||||||
| | Named Executive Officer | | Target % | | Award Granted | | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zimpleman | 500% | 500% | ||||||||||
| Lillis | 275% | 275% | ||||||||||
| McCaughan | 350% | 325% | ||||||||||
| Houston | 350% | 375% | ||||||||||
| Valdés | 225% | 200% | ||||||||||
| 2015 Long Term Incentive Target & Grant (as % of base salary) | ||||
|---|---|---|---|---|
| | | | | |
| Named Executive Officer | | Target % | | Award Granted |
| | | | | |
Zimpleman | | 600% | | 600% |
| | | | | |
Houston | | 425% | | 425% |
| | | | | |
Lillis | | 275% | | 300% |
| | | | | |
Dunbar | | 175% | | 225% |
| | | | | |
McCaughan | | 350% | | 325% |
| | | | | |
Valdés | | 225% | | 250% |
| | | | | |
| | | 2016 Proxy Statement31 |
The long term incentive targets were established by the Committee to be market competitive with award opportunities for comparable positions in Peer Group companies. Mr. Zimpleman's award opportunity is greater than those of the other Named Executive Officers because at the time of the 2015 annual equity grant he haswas CEO and had overall responsibility for the Company.
Executives' long term compensation is awarded in the form of non-qualified stock options and performance based restricted stock units ("PSUs"),PSUs, which each represent 50% of the total long-term incentive award.grant date fair value. PSUs entitle the executiveExecutive to earn shares of Principal Financial Group, Inc. Common Stock if certain levels of performance are achieved. The Committee uses stock options as part of the long-termlong term incentive program because options are an effective way to link an Executive's compensation to changes in shareholder value. The weighting is not based on a specific formula or algorithm, but rather is intended to create a balance between the achievement of specific operating objectives and changes in shareholder value based on the Committee's judgment, which may change from time to time.
Stock options have a ten-yearten year term and an exercise price equal to the closing price on the date of grant. Stock options vest in three equal annual installments starting on the first anniversary of the grant date.
PSUs vest based on continued service and achieving financial objectives over a three-yearthree year period (with each three-yearthree year period treated as a "Performance Cycle"). Executives may defer the receipt of PSUs.
For the 20122015 PSUs, the performance threshold is met if either of the following goals is met:
If either the ROE or OI objectivesobjective is met or exceeded, the number of units earned is determined using two performance measures, each weighted at 50%, to determine the funding level.percentage of target PSUs actually earned.
In combination, the two measures selected provide an appropriate balancea healthy tension in creating incentives to maintain a sufficient level of equity over the long term while also making sure that capital is being used effectively.
| 2012-2014 PSU Performance Scale | ||||||||||||||||
| | Performance Level | | Threshold Award | | Target Award | | Maximum Award (150% of Target) | | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Payout (% of Target) (1) | 50% | 100% | 150% | |||||||||||||
| Average ROE | 7.5% | 15% | 19.5% | |||||||||||||
| Average BV/Share | $24.65 | $29.00 | $37.70 | |||||||||||||
| 2015-2017 PSU Performance Scale | ||||||||
| | | | | | | | | |
| Performance Level | | Threshold Award | | Target Award | | Maximum Award (150% of Target) | | |
|---|---|---|---|---|---|---|---|---|
| | | | | | | | | |
| Payout (% of Target)(1) | | 50% | | 100% | | 150% | | |
| | | | | | | | | |
| Average ROE | | 7.8% | | 15.5% | | 20.2% | | |
| | | | | | | | | |
| Average BV/Share | | $31.66 | | $37.25 | | $48.43 | | |
| | | | | | | | | |
If neither the ROE nor the OIobjective is met, no PSUs willbe earned or paid out.
If neither the ROE nor the OI threshold performance objective is met, no PSUs will be earned or paid out. |
Timing of Stock Option Awards and Other Equity Incentives
Annual grants of stock options and PSUs for the Company'sPrincipal Executives are determined by the Committee at its February meeting which occurs following the release of the prior year firm results and during an open-window period.year's results. The Committee formalized its long-standinglong standing practices by adopting a policy in 2006 regarding granting stock options and other equity awards. Under this policy, the grant date for all stock options and other stock-basedstock based awards shall never be the earlier than the date of approval, and shall be:
Authority of the Chairman, President & CEO to Grant Equity Awards:
Under the 20102014 Stock Incentive Plan, the Committee has delegated authority to the Chairman, President & CEO to make certain equity awards to sales agents and non-Executivenon Executive employees for new hires, promotions, retention and recognizing superior
| 322016 Proxy Statement | | |
performance. The Committee receives a report on these grants at the next regular Committee meeting. The total awards granted by the Chairman, President & CEO may not exceed 250,000 shares per year.
Benefits
Benefits
The Named Executive Officers participate in Principal Life's broad-basedbroad based employee benefits program, including:
Principal Life also offers all Named Executive Officers (except Mr. McCaughan) a non-qualified defined contribution plan ("Excess plan") and a defined benefit and defined contribution non-qualified retirement plans (the "NQDB" and the "Excess Plan"plan ("NQDB"). These benefits are offered to attract and retain talent and provide long term financial security to employees. The NQDB helps the Company attract mid-careermidcareer Executives and retain Executives by providing competitive retirement benefits. The NQDB is coordinated with the qualified pension plan and is designed to restore benefits that otherwise would accrue to Executives in the absence of Tax Code limitations on the qualified pension plan. The narrative to the Pension Benefits Table on pages 47-4941-43 provides additional information about the NQDB and the qualified pension plan. Principal Life maintains the Excess Plan to help attract and retain Executives by allowing Executives to save for retirement and to provide matching contributions on those savings, without regard to the limitations imposed by the Tax Code on 401(k) plans. The narrative to the Non-Qualified Deferred Compensation Table on pages 50-5144-45 provides additional information about the Excess Plan.
The value of the retirement and savings plans for NonGrandfathered Participants (see page 42) is targeted to be, in the aggregate, slightly above the median of diversified financial services companies because a large portion of the Company's business centers on the sale of retirement products. The traditionaldefined benefit pension plan benefit for Grandfathered Choice Participants (see page 47)41) has a market value above the median and the 401(k) plan match for Grandfathered Choice Participants is below market median. These benefits were also originally designed to be slightly above market median to attract and retain employees. As retirement plans evolved in the marketplace, their valuethe Company has changed, leadingbalanced realigning benefits to the realignmentmarketplace with current market in 2006.practice while not adversely impacting more tenured employees.
All other benefits are targeted at market median in the aggregate, which supports the Company's benefit strategy and aids in attracting and retaining talent.
Change of Control and Separation Pay
The Committee believes it is in the best interests of the CompanyPrincipal and its shareholders to:
3 Effective January 1, 2010, Mr. McCaughan no longer participates in the qualified pension plan, NQDB Plan or Excess Plan. This change was the result of a compensation and benefit review of asset management companies that showed that these are not common benefits for executives in the asset management industry. This change also applied to other investment professionals who work with Principal Global Investors.
For these reasons, the CompanyPrincipal has entered into "Change of Control" employment agreementsEmployment Agreements with each of the Executives. These agreements would help the Executives more fairly evaluate a potential acquisition of the Company,Principal, particularly when the acquisition would result in termination of the Executive's employment. These Change of Control employment agreementsEmployment Agreements are based on market practice and do not affect other components of the Named Executive Officers'Executives' compensation. When entering into these agreements, the Committee reviewed survey data and practices of other public insurance and financial services companies. The Committee continues to review market practices in this area for potential changes in these agreements.
All benefits provided to the Executives upon a Change of Control are paid after both a Change of Control and qualifying termination of employment have occurred (sometimes referred to as a "double-trigger""double trigger"), except that the
| | | 2016 Proxy Statement33 |
then current value of the Executive's Excess Plan and NQDB will be paid upon a Change of Control to ensure that the value of those plans is not reduced if the Company is sold. The Company entered into new Change of Control Employment Agreements with Executives in 2010 that generally reduced severance amounts as multiples of cash compensation and eliminatedThese agreements do not provide excise tax gross-ups.gross ups. See pages 52-5546-48 for details.
The Company has a severance plan to provide benefits to employees whose employment is terminated by the Company due to a reorganization or reduction in the workforce. Additional payments may be permitted in some circumstances as a result of negotiations with Executives, particularly when the CompanyPrincipal requests additional covenants from the Executives. The Company has an employment agreement with Mr. Zimpleman for his services as the Company's CEO. See page 52 for details.
Perquisites
Perquisites
The only perquisite for Executives that is notare offered to all employees is one physical examination per year. We provide this perquisiteyear to protect the health of our Executives and the Company's investment in its leadership. Executives also receive gifts of nominal value provided to all sale conference attendees and spousal business travel.
Stock Ownership Guidelines
Executives are required to own stock in the CompanyPrincipal to ensure their interests are aligned with the shareholders' interests and with the long term performance of the Company.Principal. Once the Executive achieves the required stock ownership level based on market value, the ownership requirement remains at the number of shares owned at that time, regardless of subsequent changes in stock price or salary.value. Upon promotion, the Executive is required to meet the next level of stock ownership.
Until the ownership guideline is met, Executives are required to retain a portion of the "net profit shares" resulting from equity based long term incentive plan grants. Net profit shares are the shares remaining after payment of the option exercise price and taxes owed at time of exercise, vesting of restricted stock unitsRSUs or earn out of performance shares. The percentage of net profit shares that must be retained until the multiple of salary guidelines are met are shown below:
| | | | | | ||||||||||||
Executive Level | | Retention | Ratio | | Multiple of Base Salary | |||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | |||||||||||||
Chairman (Zimpleman) | | 75% | | 5 times | ||||||||||||
| | | | | | ||||||||||||
President and CEO (Houston) | | 75% | | 5 times | ||||||||||||
| | | | | | ||||||||||||
Division Presidents & Executive Vice Presidents | | 50% | | 3 times | ||||||||||||
| | ||||||||||||||||
| | | |
All Named Executive Officers comply with these guidelines.
Claw Back Policy
The Committee has also adopted a compensation recovery policy that applies to Executive Officers. The CompanyExecutives. Principal can recover incentive compensation if the amount of the compensation was based on achievement of financial results that were subsequently restated if the Committee decides that the Executive Officer engaged in fraud or intentional misconduct that caused the restatement of the Company's financial statements, and that the amount of the Executive Officer'sExecutive's incentive compensation or equity award would have been lower had the financial results been properly reported.
Trading Policy
The CompanyPrincipal prohibits Directors and employees, including Executive Officers,Executives, from:
| 342016 Proxy Statement | | |
Succession Planning
The Human Resources Committee, the CEO and the Senior Vice President —head of Human Resources maintainhave an ongoing focus on executive development and succession planning to prepare the CompanyPrincipal for future success. In addition to preparing for CEO succession, the succession planning process has includedincludes all key executive positions. A comprehensive review of executive talent, including assessments by an independent consulting firm, has determined participants' readiness to take on additional leadership roles and identified the developmental and coaching opportunities needed to prepare them for greater responsibilities. The CEO makes a formal succession planning presentation to the Board of Directors annually. SuccessionCEO succession planning is a responsibility of the entire Board and all members participate. In addition, the Company has an emergency succession plan for the CEO that is reviewed by the Board annually. In 2015, the Company's succession plan was used when Daniel J. Houston was named CEO in conjunction with Larry D. Zimpleman's retirement. Other changes were made in the senior executive team, and all of the members of the new team are internal candidates, which speaks highly of the strength of the Board's succession planning process.
Human Resources Committee Report
The Human Resources Committee of the Company has reviewed and discussed the foregoing Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and based on such review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.
Michael T. Dan, ChairBetsy J. BernardGary E. CostleyRichard L. KeyserC. Daniel Gelatt
Roger C. Hochschild
Elizabeth E. Tallett
of Employee Incentive Plans
Members of theThe Human Resources Compensation Department reviewed alland the chief risk officers in the business units conducted a review and analysis of the Company's employee incentive compensation plans for employees to determine whether any compensation policies or practicesthe plans are reasonably likely to have a materiallymaterial adverse effect on the Company, and reviewed itstheir processes and conclusions with the Chief Risk Officer. The following factors, among others, were reviewed:assessed:
OtherSome key factors that mitigate risks of the Company's incentive plans are the Company's stock ownership guidelines for Executives, and the compensation recovery policy. The Company alsopolicy and the Human Resources Committee's ability to exercise its judgment in evaluating the quality of performance achievements when determining earned compensation. Principal prohibits all employees from purchasing any CompanyPrincipal securities on margin (except for the exercise of stock options), engaging in short sales or trading in any put or call options. options; and purchasing, directly or through a designee, any financial instrument (including prepaid variable forward contracts, equity swaps, collars and exchange funds) designed to hedge or offset any decrease in the market value of Company securities.
A summary of this informationthe assessment process and conclusions was reviewed with the Human Resources Committee. Based on this analysis, the CompanyPrincipal has determined that the Company's employee incentive compensation plans are designed to encourage behaviors that create and maintain shareholder value, do not encourage excessive risk, and are not reasonably likely to have a material adverse effect on the Company.Principal.
| | | 2016 Proxy Statement35 |
Summary Compensation Table
The following table sets forth the compensation paid to the Named Executive Officers for services provided to the Company and its subsidiaries during 2010, 20112013, 2014 and 2012.2015.
| | Name | | Year | | Salary (1) | | Bonus | | Stock Awards (2)(3) | | Option Awards (2) | | Non Equity Incentive Compensation (4) | | Change in Pension Value and Non-qualified Deferred Compensation Earnings (5) | | All Other Compensation (6) | | Total (7) | | ||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zimpleman | 2012 | $900,000 | $0 | $2,249,990 | $2,491,679 | $1,282,500 | $3,605,227 | $80,329 | $10,609,725 | |||||||||||||||||||||||||||||||
| Chairman, | 2011 | $876,923 | $0 | $1,799,986 | $1,993,320 | $1,302,000 | $3,160,566 | $72,732 | $9,205,527 | |||||||||||||||||||||||||||||||
| President & CEO | 2010 | $781,538 | $0 | $1,999,988 | $1,661,156 | $1,547,446 | $2,200,038 | $56,816 | $8,246,982 | |||||||||||||||||||||||||||||||
| Lillis | 2012 | $466,000 | $0 | $653,136 | $723,308 | $443,000 | $1,412,152 | $24,571 | $3,722,167 | |||||||||||||||||||||||||||||||
| Senior Vice | 2011 | $427,692 | $0 | $435,993 | $482,827 | $276,000 | $974,268 | $22,927 | $2,619,707 | |||||||||||||||||||||||||||||||
| President & CFO | 2010 | $373,946 | $0 | $415,016 | $387,622 | $336,552 | $599,034 | $17,428 | $2,129,598 | |||||||||||||||||||||||||||||||
| Houston | 2012 | $544,231 | $0 | $1,031,260 | $1,142,017 | $612,000 | $846,704 | $88,603 | $4,264,815 | |||||||||||||||||||||||||||||||
| Pres. Retirement, | 2011 | $519,231 | $0 | $853,108 | $944,764 | $526,000 | $507,677 | $74,386 | $3,425,166 | |||||||||||||||||||||||||||||||
| Ins. & Financial Svs | 2010 | $480,362 | $0 | $750,009 | $830,578 | $720,542 | $307,042 | $54,460 | $3,142,993 | |||||||||||||||||||||||||||||||
| McCaughan | 2012 | $593,192 | $0 | $974,995 | $1,079,730 | $1,602,000 | $76,897 | $13,673 | $4,340,487 | |||||||||||||||||||||||||||||||
| Pres. Global | 2011 | $565,423 | $0 | $855,746 | $947,681 | $1,272,000 | $73,235 | $6,329 | $3,720,414 | |||||||||||||||||||||||||||||||
| Asset Management | 2010 | $539,269 | $0 | $1,076,741 | $911,110 | $1,617,807 | $69,748 | $5,867 | $4,220,542 | |||||||||||||||||||||||||||||||
| Valdés | ||||||||||||||||||||||||||||||||||||||||
| Pres. - Int'l Asset | 2012 | $519,231 | $0 | $525,008 | $581,366 | $370,000 | $35,446 | $67,530 | $2,098,581 | |||||||||||||||||||||||||||||||
| Mgmt & Accum |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | Year | Salary(1)(2) | Bonus | Stock Awards(3)(4) | Option Awards(3) | Non Equity Incentive Compensation(5) | Change in Pension Value and Non- Qualified Deferred Compensation Earnings(6)(7) | All Other Compensation(8) | Total(9) | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Zimpleman | | 2015 | $ | 1,038,462 | $ | 0 | $ | 2,999,982 | $ | 3,000,043 | $ | 1,596,000 | $ | 1,517,176 | $ | 119,887 | $ | 10,271,549 | ||||||||||
| 2014 | $ | 982,692 | $ | 0 | $ | 3,000,004 | $ | 3,000,015 | $ | 2,280,000 | $ | 7,549,888 | $ | 106,789 | $ | 16,919,388 | ||||||||||||
| | 2013 | $ | 919,231 | $ | 0 | $ | 2,428,124 | $ | 2,428,121 | $ | 2,137,000 | $ | 1,041,951 | $ | 80,474 | $ | 9,034,901 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Houston | 2015 | $ | 735,577 | $ | 0 | $ | 1,434,366 | $ | 1,434,390 | $ | 1,482,000 | $ | 0 | $ | 118,193 | $ | 5,204,526 | |||||||||||
| | 2014 | $ | 592,769 | $ | 0 | $ | 1,115,627 | $ | 1,115,643 | $ | 962,000 | $ | 1,579,560 | $ | 106,984 | $ | 5,472,583 | |||||||||||
| 2013 | $ | 566,923 | $ | 0 | $ | 1,072,505 | $ | 1,072,513 | $ | 858,000 | $ | 0 | $ | 79,460 | $ | 3,649,400 | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Lillis | | 2015 | $ | 567,346 | $ | 0 | $ | 826,516 | $ | 826,496 | $ | 440,000 | $ | 0 | $ | 51,482 | $ | 2,711,840 | ||||||||||
| 2014 | $ | 523,077 | $ | 0 | $ | 795,004 | $ | 794,986 | $ | 604,000 | $ | 2,921,717 | $ | 47,410 | $ | 5,686,194 | ||||||||||||
| | 2013 | $ | 494,231 | $ | 0 | $ | 750,001 | $ | 749,982 | $ | 630,000 | $ | 811,848 | $ | 42,651 | $ | 3,478,713 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
McCaughan | 2015 | $ | 673,731 | $ | 0 | $ | 1,061,145 | $ | 1,061,134 | $ | 1,563,000 | $ | 46,816 | $ | 13,702 | $ | 4,419,528 | |||||||||||
| | 2014 | $ | 629,616 | $ | 0 | $ | 3,030,265 | $ | 1,030,261 | $ | 2,060,000 | $ | 123,802 | $ | 13,221 | $ | 6,887,165 | |||||||||||
| 2013 | $ | 611,539 | $ | 0 | $ | 999,377 | $ | 999,379 | $ | 2,325,000 | $ | 80,742 | $ | 13,290 | $ | 5,029,326 | ||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Valdés | | 2015 | $ | 598,385 | $ | 0 | $ | 724,984 | $ | 724,959 | $ | 329,000 | $ | 113,838 | $ | 68,003 | $ | 2,559,169 | ||||||||||
| 2014 | $ | 559,077 | $ | 0 | $ | 1,703,763 | $ | 703,747 | $ | 481,000 | $ | 143,136 | $ | 75,211 | $ | 3,665,934 | ||||||||||||
| | 2013 | $ | 541,154 | $ | 0 | $ | 641,538 | $ | 641,536 | $ | 467,000 | $ | 90,767 | $ | 63,008 | $ | 2,445,003 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dunbar | 2015 | $ | 483,577 | $ | 0 | $ | 532,138 | $ | 532,099 | $ | 278,000 | $ | 0 | $ | 54,824 | $ | 1,880,638 | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Named Executive Officer | | 401(k) Employee Contribution | | Excess Plan Employee Contributions | | Total Employee Contributions | | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zimpleman | $19,346 | $72,692 | $92,038 | |||||||||||||
| Lillis | $13,885 | $22,929 | $36,814 | |||||||||||||
| Houston | $20,644 | $35,462 | $56,106 | |||||||||||||
| McCaughan | $17,000 | $0 | $17,000 | |||||||||||||
| Valdés | $8,791 | $24,561 | $33,352 |
| | | | | | | | | | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | ||||||
| | Named Executive Officer | | 401(k) Employee Contribution | | Excess Plan Employee Contributions | | Total Employee Contributions | | ||||||
| | | | | | | | | | ||||||
| | Zimpleman | | | $ | 24,000 | | | $ | 85,154 | | | $ | 109,154 | |
| | | | | | | | | | ||||||
| | Houston | | | $ | 18,462 | | | $ | 58,846 | | | $ | 77,308 | |
| | | | | | | | | | ||||||
| | Lillis | | | $ | 18,231 | | | $ | 34,041 | | | $ | 52,272 | |
| | | | | | | | | | ||||||
| | Dunbar | | | $ | 22,586 | | | $ | 24,179 | | | $ | 46,765 | |
| | | | | | | | | | ||||||
| | McCaughan | | | $ | 18,000 | | | $ | 0 | | | $ | 18,000 | |
| | | | | | | | | | ||||||
| | Valdés | | | $ | 24,000 | | | $ | 29,674 | | | $ | 53,674 | |
| | | | | | | | | | ||||||
| | Grant Date | | Exercise Price | | Volatility | | Expected Term | | Dividend Yield | | Risk-Free Interest Rate | | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| February 23, 2010 | $22.21 | 66.60% | 6 years | 2.251% | 2.75% | |||||||||||||||||||
| February 28, 2011 | $34.26 | 67.88% | 6 years | 1.605% | 2.48% | |||||||||||||||||||
| February 27, 2012 | $27.46 | 70.03% | 6 years | 2.550% | 1.10% |
| | | | | | | | | | | | | | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | |||||
| | Grant Date | | Exercise Price | | Volatility | | Expected Term | | Dividend Yield | | Risk Free Interest Rate | | |||||
| | | | | | | | | | | | | | |||||
| | February 25, 2013 | | | $ | 30.70 | | 53.30% | | 6.5 years | | 2.997% | | 1.13% | | |||
| | | | | | | | | | | | | | |||||
| | February 24, 2014 | | | $ | 44.88 | | 53.21% | | 6.5 years | | 2.496% | | 2.04% | | |||
| | | | | | | | | | | | | | |||||
| | February 23, 2015 | | | $ | 51.33 | | 52.21% | | 6.5 years | | 2.805% | | 1.80% | | |||
| | | | | | | | | | | | | | |||||
| 362016 Proxy Statement | | |
PSUs granted in 20122015 are earned at the maximum payout, the grant date value of such PSUs would be as shown in the following table, and the amounts reported in the Stock Awards column, above, would be increased by the amount shown in the column to the far right of the following table.
| | Named Executive Officer | | Grant Date Value of 2012 PSUs at Maximum Payout | | Amount by Which Aggregate Grant Date Values Reported Would be Increased | | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zimpleman | $3,374,985 | $1,124,995 | ||||||||||
| Lillis | $979,704 | $326,568 | ||||||||||
| Houston | $1,546,890 | $515,630 | ||||||||||
| McCaughan | $1,462,492 | $487,497 | ||||||||||
| Valdés | $787,512 | $262,504 |
| | | | | | ||
|---|---|---|---|---|---|---|
| | | | | | ||
| | Named Executive Officer | | Amount by Which Aggregate Grant Date Values Reported Would be Increased | | ||
| | | | | | ||
| | Zimpleman | | | $ | 1,499,991 | |
| | | | | | ||
| | Houston | | | $ | 530,573 | |
| | | | | | ||
| | Lillis | | | $ | 717,183 | |
| | | | | | ||
| | Dunbar | | | $ | 266,069 | |
| | | | | | ||
| | McCaughan | | | $ | 362,492 | |
| | | | | | ||
| | Valdés | | | $ | 413,258 | |
| | | | | | ||
| | | | | | ||
|---|---|---|---|---|---|---|
| | | | | | ||
| | Named Executive Officer | | Employee Contributions on Incentive Pay | | ||
| | | | | | ||
| | Zimpleman | | | $ | 0 | |
| | | | | | ||
| | Houston | | | $ | 125,137 | |
| | | | | | ||
| | Lillis | | | $ | 34,104 | |
| | | | | | ||
| | Dunbar | | | $ | 0 | |
| | | | | | ||
| | McCaughan | | | $ | 0 | |
| | | | | | ||
| | Valdés | | | $ | 26,545 | |
| | | | | | ||
| | Named Executive Officer | | Perquisites and Other Personal Benefits (a) | | Principal Life Contributions to Defined Contribution Plans (b) | | Total | | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zimpleman | $14,269 | $66,060 | $80,329 | |||||||||||||
| Lillis | $2,311 | $22,260 | $24,571 | |||||||||||||
| Houston | $24,389 | $64,214 | $88,603 | |||||||||||||
| McCaughan | $923 | $12,750 | $13,673 | |||||||||||||
| Valdés | $36,359 | $31,171 | $67,530 |
| | | | | | | | | | |||||
| | Name | | Perquisites & Other Personal Benefits(a) | | Principal Life Contributions to Defined Contribution Plans(b) | | Total | | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | |||||
| | Zimpleman | | | $ | 20,333 | | | $ | 99,554 | | $ | 119,887 | |
| | | | | | | | | | |||||
| | Lillis | | | $ | 16,342 | | | $ | 35,140 | | $ | 51,482 | |
| | | | | | | | | | |||||
| | Houston | | | $ | 16,339 | | | $ | 101,854 | | $ | 118,193 | |
| | | | | | | | | | |||||
| | McCaughan | | | $ | 202 | | | $ | 13,500 | | $ | 13,702 | |
| | | | | | | | | | |||||
| | Valdés | | | $ | 4,033 | | | $ | 63,970 | | $ | 68,003 | |
| | | | | | | | | | |||||
| | Dunbar | | | $ | 6,479 | | | $ | 48,345 | | $ | 54,824 | |
| | | | | | | | | | |||||
| | | 2016 Proxy Statement37 |
| | Named Executive Officer | | 401(k) Matching Contribution Made by Principal Life | | Excess Plan Matching Contribution Made by Principal Life | | Total | | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zimpleman | $6,375 | $59,685 | $66,060 | |||||||||||||
| Lillis | $5,100 | $17,160 | $22,260 | |||||||||||||
| Houston | $6,800 | $57,414 | $64,214 | |||||||||||||
| McCaughan | $12,750 | $0 | $12,750 | |||||||||||||
| Valdés | $12,750 | $18,421 | $31,171 |
| | | | | | | | | | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | |||||
| | Named Executive Officer | | 401(k) Matching Contribution Made by Principal Life | | Excess Plan Matching Contribution Made by Principal Life | | Total | | |||||
| | | | | | | | | | |||||
| | Zimpleman | | | $ | 7,950 | | | $ | 91,604 | | $ | 99,554 | |
| | | | | | | | | | |||||
| | Houston | | | $ | 13,500 | | | $ | 88,354 | | $ | 101,854 | |
| | | | | | | | | | |||||
| | Lillis | | | $ | 6,554 | | | $ | 28,586 | | $ | 35,140 | |
| | | | | | | | | | |||||
| | Dunbar | | | $ | 13,500 | | | $ | 34,845 | | $ | 48,345 | |
| | | | | | | | | | |||||
| | McCaughan | | | $ | 13,500 | | | $ | 0 | | $ | 13,500 | |
| | | | | | | | | | |||||
| | Valdés | | | $ | 13,500 | | | $ | 50,470 | | $ | 63,970 | |
| | | | | | | | | | |||||
2015
| Estimated Future Payouts Under Non Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards (2) | All Other Stock Awards: Number of Shares | All Other Option Awards: Number of Securities | Exercise or Base Price of | Grant Date Fair Value of Stock and | |||||||||||||||||||||||||||||||||||||||||||
Name | Grant Date | Threshold | Target | Maximum (1) | Threshold | Target | Maximum | of Stock or Units (3) | Underlying Options (4) | Option Awards (5) | Option Awards (6) | |||||||||||||||||||||||||||||||||||||
| Zimpleman | N/A | $1,282,500 | $5,600,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | 40,969 | 81,937 | 122,906 | $2,249,990 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | 178,615 | $27.46 | $2,491,679 | |||||||||||||||||||||||||||||||||||||||||||||
| Lillis | N/A | $442,700 | $1,600,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | 11,893 | 23,785 | 35,678 | $653,136 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | 51,850 | $27.46 | $723,308 | |||||||||||||||||||||||||||||||||||||||||||||
| Houston | N/A | $646,274 | $2,400,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | 18,778 | 37,555 | 56,333 | $1,031,260 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | 81,865 | $27.46 | $1,142,017 | |||||||||||||||||||||||||||||||||||||||||||||
| McCaughan | N/A | $1,690,598 | $4,800,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | 17,753 | 35,506 | 53,259 | $974,995 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | 77,400 | $27.46 | $1,079,730 | |||||||||||||||||||||||||||||||||||||||||||||
| Valdés | N/A | $369,952 | $1,600,000 | |||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | 9,560 | 19,119 | 28,679 | $525,008 | ||||||||||||||||||||||||||||||||||||||||||||
| 2/27/2012 | 41,675 | $27.46 | $581,366 | |||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Grant | Estimated Future Payouts Under Non Equity Incentive Plan Awards | Estimated Future Payouts Under Equity Incentive Plan Awards(2) | Other Stock | Other Option | Exercise | Fair | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Name | Date | Threshold | Target | Maximum(1) | Threshold | Target | Maximum | Awards | Awards(3) | Price(4) | Value(5) | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Zimpleman | | | N/A | $ | 2,000,000 | | NA | | | | | | | | | | ||||||||||||
| 02/23/2015 | 14,611 | 58,445 | 87,668 | $ | 2,999,982 | |||||||||||||||||||||||
| | 02/23/2015 | | | | | | | | | | 146,845 | $ | 51.33 | $ | 3,000,043 | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Lillis | N/A | $ | 551,000 | $ | 3,000,000 | |||||||||||||||||||||||
| | 02/23/2015 | | | | | | 4,026 | 16,102 | 24,153 | | | | | $ | 826,516 | |||||||||||||
| 02/23/2015 | 40,455 | $ | 51.33 | $ | 826,496 | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | �� | | | | | | | | | | | |
Houston | | | N/A | $ | 1,858,212 | $ | 10,400,000 | | | | | | | | | | ||||||||||||
| 02/23/2015 | 6,986 | 27,944 | 41,916 | $ | 1,434,366 | |||||||||||||||||||||||
| | 02/23/2015 | | | | | | | | | | 70,210 | $ | 51.33 | $ | 1,434,390 | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
McCaughan | N/A | $ | 1,959,000 | $ | 7,400,000 | |||||||||||||||||||||||
| | 02/23/2015 | | | | | | 5,168 | 20,673 | 31,010 | | | | | $ | 1,061,145 | |||||||||||||
| 02/23/2015 | 51,940 | $ | 51.33 | $ | 1,061,134 | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Valdés | | | N/A | $ | 435,000 | $ | 5,930,000 | | | | | | | | | | ||||||||||||
| 02/23/2015 | 3,531 | 14,124 | 21,186 | $ | 724,985 | |||||||||||||||||||||||
| | 02/23/2015 | | | | | | | | | | 35,485 | $ | 51.33 | $ | 724,959 | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Dunbar | N/A | $ | 331,100 | $ | 3,000,000 | |||||||||||||||||||||||
| | 02/23/2015 | | | | | | 2,592 | 10,367 | 15,551 | | | | | $ | 532,138 | |||||||||||||
| 02/23/2015 | 26,045 | $ | 51.33 | $ | 532,099 | |||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 382016 Proxy Statement | | |
Outstanding Equity Awards at Fiscal Year End December 31, 2012
2015
| Option Awards | Stock Awards | |||||||||||||||||||||||||||||||||||
| Name | Number of Securities Underlying Unexercised Options Exercisable (1) | Number of Securities Underlying Unexercised Options Unexercisable | Option Exercise Price | Option Expiration Date | Number of Shares or Units of Stock that Have Not Vested (2) | Market Value of Shares or Units of Stock that Have Not Vested | Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights that Have Not Vested (3) | Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights that Have Not Vested (4) | ||||||||||||||||||||||||||||
| Zimpleman (5) | 48,353 | 0 | $27.57 | 02/25/2013 | ||||||||||||||||||||||||||||||||
| 77,790 | 0 | $36.30 | 02/24/2014 | |||||||||||||||||||||||||||||||||
| 108,185 | 0 | $39.02 | 02/28/2015 | |||||||||||||||||||||||||||||||||
| 82,885 | 0 | $49.25 | 02/27/2016 | |||||||||||||||||||||||||||||||||
| 1,120 | 0 | $54.45 | 06/01/2016 | |||||||||||||||||||||||||||||||||
| 74,935 | 0 | $62.63 | 02/26/2017 | |||||||||||||||||||||||||||||||||
| 142,985 | 0 | $60.10 | 02/26/2018 | |||||||||||||||||||||||||||||||||
| 368,615 | 0 | $11.07 | 02/24/2019 | |||||||||||||||||||||||||||||||||
| 96,466 | 48,234 | $22.21 | 02/23/2020 | 24,263 | $691,976 | 80,068 | $2,283,553 | |||||||||||||||||||||||||||||
| 35,305 | 70,610 | $34.26 | 02/28/2021 | 55,595 | $1,585,566 | |||||||||||||||||||||||||||||||
| 0 | 178,615 | $27.46 | 02/27/2022 | 84,275 | $2,403,526 | |||||||||||||||||||||||||||||||
| Lillis (6) | 7,380 | 0 | $60.10 | 02/26/2018 | ||||||||||||||||||||||||||||||||
| 13,505 | 0 | $56.42 | 05/19/2018 | |||||||||||||||||||||||||||||||||
| 22,510 | 11,255 | $22.21 | 02/23/2020 | 3,155 | $89,970 | 18,683 | $532,841 | |||||||||||||||||||||||||||||
| 8,551 | 17,104 | $34.26 | 02/28/2021 | 13,466 | $384,056 | |||||||||||||||||||||||||||||||
| 0 | 51,850 | $27.46 | 02/27/2022 | 24,464 | $697,705 | |||||||||||||||||||||||||||||||
| Houston | 37,080 | 0 | $60.10 | 02/26/2018 | ||||||||||||||||||||||||||||||||
| 129,810 | 0 | $11.07 | 02/24/2019 | |||||||||||||||||||||||||||||||||
| 48,233 | 24,117 | $22.21 | 02/23/2020 | 40,035 | $1,141,794 | |||||||||||||||||||||||||||||||
| 16,733 | 33,467 | $34.26 | 02/28/2021 | 26,349 | $751,483 | |||||||||||||||||||||||||||||||
| 0 | 81,865 | $27.46 | 02/27/2022 | 38,627 | $1,101,632 | |||||||||||||||||||||||||||||||
| McCaughan | 40,475 | 0 | $27.57 | 02/25/2013 | ||||||||||||||||||||||||||||||||
| 74,960 | 0 | $36.30 | 02/24/2014 | |||||||||||||||||||||||||||||||||
| 91,955 | 0 | $39.02 | 02/28/2015 | |||||||||||||||||||||||||||||||||
| 63,760 | 0 | $49.25 | 02/27/2016 | |||||||||||||||||||||||||||||||||
| 48,990 | 0 | $62.63 | 02/26/2017 | |||||||||||||||||||||||||||||||||
| 60,590 | 0 | $60.10 | 02/26/2018 | |||||||||||||||||||||||||||||||||
| 173,555 | 0 | $11.07 | 02/24/2019 | |||||||||||||||||||||||||||||||||
| 52,910 | 26,455 | $22.21 | 02/23/2020 | 12,325 | $351,521 | 43,918 | $1,252,527 | |||||||||||||||||||||||||||||
| 16,785 | 33,570 | $34.26 | 02/28/2021 | 26,431 | $753,807 | |||||||||||||||||||||||||||||||
| 0 | 77,400 | $27.46 | 02/27/2022 | 36,519 | $1,041,527 | |||||||||||||||||||||||||||||||
| Valdés | 0 | 41,675 | $27.46 | 02/27/2022 | 19,665 | $560,833 | ||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | |||||||||
| | | | | | Stock Awards | | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | |||||||||
| | Option Awards | | | Market | | Equity Incentive Plan Awards: | | Equity Incentive Plan Awards: Market or | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | ||||||||
| Name | | Number of Securities Underlying Unexercised Options Exercisable(1) | | Number of Securities Underlying Unexercised Options Unexercisable | | Option Exercise Price | | Option Expiration Date | | Number of Shares or Units of Stock that Have Not Vested(2) | | Value of Shares or Units of Stock that Have Not Vested | | Number of Unearned Shares, Units, or Other Rights that have not vested(3) | | payout value of Unearned Shares, Units, or Other Rights that have not vested(4) | | |||||||||
| | | | | | | | | | | | | | | | | | | |||||||||
| Zimpleman | | 82,885 | | 0 | | $ | 49.25 | | 02/27/2016 | | | | | | | | | | | |||||||
| | 1,120 | | 0 | | $ | 54.45 | | 06/01/2016 | | | | | | | ||||||||||||
| | 74,935 | | 0 | | $ | 62.63 | | 02/26/2017 | | | | | | | | | | | ||||||||
| | 142,985 | | 0 | | $ | 60.10 | | 02/26/2018 | | | | | | | ||||||||||||
| | 368,615 | | 0 | | $ | 11.07 | | 02/24/2019 | | | | | | | | | | | ||||||||
| | 144,700 | | 0 | | $ | 22.21 | | 02/23/2020 | | | | | | | ||||||||||||
| | 105,915 | | 0 | | $ | 34.26 | | 02/28/2021 | | | | | | | | | | | ||||||||
| | 178,615 | | 0 | | $ | 27.46 | | 02/27/2022 | | | | | | | ||||||||||||
| | 135,460 | | 67,730 | | $ | 30.70 | | 02/25/2023 | | | | | | 88,231 | | | $ | 3,968,630 | | |||||||
| | 52,938 | | 105,877 | | $ | 44.88 | | 02/24/2024 | | | | 70,672 | | | $ | 3,178,827 | | |||||||||
| | 0 | | 146,845 | | $ | 51.33 | | 02/23/2025 | | | | | | 60,255 | | | $ | 2,710,270 | | |||||||
| | | | | | | | | | | | | | | | | | | |||||||||
| Houston | | 24,870 | | 0 | | $ | 62.63 | | 02/26/2017 | | | | | | | |||||||||||
| | 37,080 | | 0 | | $ | 60.10 | | 02/26/2018 | | | | | | | | | | | ||||||||
| | 72,350 | | 0 | | $ | 22.21 | | 02/23/2020 | | | | | | | ||||||||||||
| | 50,200 | | 0 | | $ | 34.26 | | 02/28/2021 | | | | | | | | | | | ||||||||
| | 81,865 | | 0 | | $ | 27.46 | | 02/27/2022 | | | | | | | ||||||||||||
| | 59,833 | | 29,917 | | $ | 30.70 | | 02/25/2023 | | | | | | 38,971 | | | $ | 1,752,916 | | |||||||
| | 19,686 | | 39,374 | | $ | 44.88 | | 02/24/2024 | | | | 26,281 | | | $ | 1,182,119 | | |||||||||
| | 0 | | 70,210 | | $ | 51.33 | | 02/23/2025 | | | | | | 28,809 | | | $ | 1,295,829 | | |||||||
| | | | | | | | | | | | | | | | | | | |||||||||
| Lillis | | 5,525 | | 0 | | $ | 62.63 | | 02/26/2017 | | | | | | | |||||||||||
| | 7,380 | | 0 | | $ | 60.10 | | 02/26/2018 | | | | | | | | | | | ||||||||
| | 13,505 | | 0 | | $ | 56.42 | | 05/19/2018 | | | | | | | ||||||||||||
| | 25,655 | | 0 | | $ | 34.26 | | 02/28/2021 | | | | | | | | | | | ||||||||
| | 41,840 | | 20,920 | | $ | 30.70 | | 02/25/2023 | | | | 27,252 | | | $ | 1,225,795 | | |||||||||
| | 14,028 | | 28,057 | | $ | 44.88 | | 02/24/2024 | | | | | | 18,728 | | | $ | 842,385 | | |||||||
| | 0 | | 40,455 | | $ | 51.33 | | 02/23/2025 | | | | 16,600 | | | $ | 746,668 | | |||||||||
| | | | | | | | | | | | | | | | | | | |||||||||
| McCaughan | | 15,940 | | 0 | | $ | 49.25 | | 02/27/2016 | | | | | | | | | | | |||||||
| | 48,990 | | 0 | | $ | 62.63 | | 02/26/2017 | | | | | | | ||||||||||||
| | 60,590 | | 0 | | $ | 60.10 | | 02/26/2018 | | | | | | | | | | | ||||||||
| | 27,555 | | 0 | | $ | 11.07 | | 02/24/2019 | | | | | | | ||||||||||||
| | 79,365 | | 0 | | $ | 22.21 | | 02/23/2020 | | | | | | | | | | | ||||||||
| | 50,355 | | 0 | | $ | 34.26 | | 02/28/2021 | | | | | | | ||||||||||||
| | 77,400 | | 0 | | $ | 27.46 | | 02/27/2022 | | | | | | | | | | | ||||||||
| | 55,753 | | 27,877 | | $ | 30.70 | | 02/25/2023 | | | | 36,314 | | | $ | 1,633,404 | | |||||||||
| | 18,180 | | 36,360 | | $ | 44.88 | | 02/24/2024 | | | | | | 24,270 | | | $ | 1,091,665 | | |||||||
| | | | | | 38,486 | | $ | 1,731,100 | | | | | ||||||||||||||
| | 0 | | 51,940 | | $ | 51.33 | | 02/23/2025 | | | | | | 21,313 | | | $ | 958,659 | | |||||||
| | | | | | | | | | | | | | | | | | | |||||||||
| Valdés | | 7,480 | | 0 | | $ | 62.63 | | 02/26/2017 | | | | | | | |||||||||||
| | 10,375 | | 0 | | $ | 60.10 | | 02/26/2018 | | | | | | | | | | | ||||||||
| | 18,390 | | 0 | | $ | 34.26 | | 02/28/2021 | | | | | | | ||||||||||||
| | 35,790 | | 17,895 | | $ | 30.70 | | 02/25/2023 | | | | | | 23,311 | | | $ | 1,048,529 | | |||||||
| | 12,418 | | 24,837 | | $ | 44.88 | | 02/24/2024 | | | | 16,578 | | | $ | 745,678 | | |||||||||
| | | | | | | | | | 19,243 | | $ | 865,550 | | | | | | | ||||||||
| | 0 | | 35,485 | | $ | 51.33 | | 02/23/2025 | | | | 14,561 | | | $ | 654,954 | | |||||||||
| | | | | | | | | | | | | | | | | | | |||||||||
| Dunbar | | 0 | | 26,045 | | $ | 51.33 | | 02/23/2025 | | | | | | 10,688 | | | $ | 480,746 | | ||||||
| | | | | | | | | | | | | | | | | | | |||||||||
| | | 2016 Proxy Statement39 |
the ROE or operating income threshold performance measure is met as approved by the Human Resources Committee. PSUs granted in 20122015 will vest on December 31, 20142017 and will pay out based on performance against certain ROE and BV/Share performance goals, but only if either the ROE or operating income threshold is met as approved by the Human Resources Committee.
ExecutivesNamed Executive Officers may defer PSUs that are earned and would otherwise be paid shortly after the performance period. Annual cash incentive awards, as shown in the Non-EquityNonEquity Incentive Compensation column of the Summary Compensation Table, may also be deferred into the Excess Plan.
The following table provides information concerning the exercise of stock options and the vesting of RSUs and PSUs during calendar year 20122015 for each Named Executive Officer on an aggregated basis.
| | | | OPTION AWARDS | | STOCK AWARDS | | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Named Executive Officer | Number of Shares Acquired on Exercise | Value Realized on Exercise (1) | Number of Shares Acquired on Vesting | Value Realized on Vesting (2) | ||||||||||||||||
| Zimpleman | 41,095 | $100,683 | 79,340 | $2,435,745 | ||||||||||||||||
| Lillis (3) | 44,895 | $693,268 | 18,513 | $568,326 | ||||||||||||||||
| Houston (4) | 13,515 | $5,811 | 84,214 | $2,458,419 | ||||||||||||||||
| McCaughan (4) | 66,817 | $20,186 | 98,111 | $2,856,409 | ||||||||||||||||
| Valdés | 0 | $0 | 10,049 | $308,509 | ||||||||||||||||
| | | | | | | | | | | ||||||
| | Option Awards | | Stock Awards | | |||||||||||
| | | | | | | | | | | ||||||
| Named Executive Officer | | Number of Shares Acquired on Exercise | | Value Realized on Exercise(1) | | Number of Shares Acquired on Vesting | | Value Realized on Vesting(2) | | ||||||
| | | | | | | | | | | ||||||
| Zimpleman | | | 0 | | $ | 0 | | | 88,232 | | $ | 3,298,098 | | ||
| | | | | | | | | | | ||||||
| Houston | | | 1,610 | | $ | 4,508 | | | 38,972 | | $ | 1,456,766 | | ||
| | | | | | | | | | | ||||||
| Lillis | | | 55,085 | | $ | 1,371,202 | | | 27,253 | | $ | 1,018,720 | | ||
| | | | | | | | | | | ||||||
| Dunbar | | | 8,275 | | $ | 47,851 | | | 7,849 | | $ | 293,394 | | ||
| | | | | | | | | | | ||||||
| McCaughan | | | 96,958 | | $ | 1,606,164 | | | 36,315 | | $ | 1,357,457 | | ||
| | | | | | | | | | | ||||||
| Valdés | | | 20,162 | | $ | 364,422 | | | 23,312 | | $ | 871,396 | | ||
| | | | | | | | | | | ||||||
| 402016 Proxy Statement | | |
Pension Plan Information
| | Participant Group | | Pension Benefit Formula | | | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| GRANDFATHERED CHOICE Grandfathered Choice Employees are employees who were age 47 or older with at least ten years of service on December 31, 2005, and elected to retain the prior benefit provisions under the DB Plan and the NQDB Plan and to forego receipt of the additional matching contributions offered under the 401(k) and Excess Plans. | Defined Benefit Plan (Traditional Formula) 39.2% of Average Compensation (The highest five consecutive years' total Pay out of the past ten years of Pay. "Pay" is the Named Executive Officer's base salary and annual incentive bonus up to the Tax Code limits) below the Integration Level (1) plus 61.25% of Average Compensation above the Integration Level. Cash Balance Plan - The Annual Pay Credits are calculated using the table below | |||||||||||||||||||||||||
| Age + Service | Annual Pay Credit | |||||||||||||||||||||||||
| Years (Points) | Contribution on all Pay | Contribution on Pay above Taxable Wage Base(2) | ||||||||||||||||||||||||
| < 40 | 4.00% | 2.00% | ||||||||||||||||||||||||
| 40 – 49 | 5.50% | 2.75% | ||||||||||||||||||||||||
| 50 – 59 | 7.00% | 3.50% | ||||||||||||||||||||||||
| 60 – 69 | 9.00% | 4.50% | ||||||||||||||||||||||||
| 70 – 79 | 11.50% | 5.75% | ||||||||||||||||||||||||
| 80 or more | 14.00% | 7.00% | ||||||||||||||||||||||||
| Messrs. Zimpleman and Lillis are Grandfathered Choice participants and their benefit at retirement will be the greater of the benefit provided under the Traditional or Cash Balance Formulas. | NQ Defined Benefit The NQDB benefit formula for employees hired before January 1, 2002, who are also Grandfathered Choice Participants is the greater of: • 65% of the employee's Average Compensation, offset by Social Security and DB Plan benefits; or • The traditional or cash balance DB Plan benefit for Grandfathered Choice Participants (whichever is greater) without regard to Tax Code limits, offset by the benefit that can be provided under the DB Plan. | |||||||||||||||||||||||||
| Reduction if payments start earlier than Normal Retirement Age (Traditional Benefit Formula only): | ||||||||||||||||||||||||||
| • The Company subsidizes early retirement if the Executive remains employed until Early Retirement Age (age 57 with 10 years of service), which is the earliest date an employee may begin receiving retirement benefits. • If the Executive retires after Early Retirement Age but before Normal Retirement Age (age 65), those benefits received by the Executive prior to age 62 are reduced to reflect payments are beginning at an earlier age. The early retirement benefits range from 75% at age 57 to 95% at age 61. • If the Executive terminates employment before reaching Early Retirement Age, Principal Life does not subsidize early retirement. The early retirement benefits range from 58.6% at age 57 to 92.8% at age 64. • Benefits receive a Cost of Living(3) adjustment after retirement benefits commence. | ||||||||||||||||||||||||||
(1) The Covered Compensation Table in the Tax Code. (2) The Social Security Taxable Wage Base. (3) Seventy-five percent of increase in the Consumer Price Index. An average is taken for October through September and applied to the following year. | ||||||||||||||||||||||||||
| | | | | | | | | | | | | |
| | Participant Group | | | Pension Benefit Formula | | |||||||
| | | | | | | | | | | | | |
| | Grandfathered Participants Grandfathered Participants were age 47 or older with at least ten years of service on December 31, 2005, and elected to retain the prior benefit provisions under the DB Plan and the NQDB Plan and to forego receipt of the additional matching contributions offered under the 401(k) and Excess Plans. | | | Defined Benefit Plan ("DB") (Traditional Formula) 39.2% of Average Compensation (the highest five consecutive years' total Pay out of the past ten years of Pay. "Pay" is the Named Executive Officer's base salary and annual incentive bonus up to the Tax Code limits) below the Integration Level (1) plus 61.25% of Average Compensation above the Integration Level. Cash Balance Plan—The Annual Pay Credits are calculated using the table below | | |||||||
| | | | | | | | | | | | | |
| | | | | Annual Pay Credit | | |||||||
| | | | Age+ Service Years (Points) | | Contribution on All Pay | | Contribution on Pay Above Taxable Wage Base(2) | | ||||
| | | | | | | | | | | | | |
| | | | < 40 | | 4.00% | | 2.00% | | ||||
| | | | | | | | | | | | | |
| | | | 40 – 49 | | 5.50% | | 2.75% | | ||||
| | | | | | | | | | | | | |
| | | | 50 – 59 | | 7.00% | | 3.50% | | ||||
| | | | | | | | | | | | | |
| | | | 60 – 69 | | 9.00% | | 4.50% | | ||||
| | | | | | | | | | | | | |
| | | | 70 – 79 | | 11.50% | | 5.75% | | ||||
| | | | | | | | | | | | | |
| | | | 80 or more | | 14.00% | | 7.00% | | ||||
| | | | | | | | | | | | | |
| | Messrs. Zimpleman and Lillis' benefit at retirement will be the greater of the benefit under the Traditional or Cash Balance Formulas. | | | NQ Defined Benefit The NQDB benefit formula for Grandfathered Participants hired before January 1, 2002 is the greater of: • 65% of Average Compensation, offset by Social Security and DB Plan benefits; or • The greater of the traditional or cash balance DB Plan benefit for Grandfathered Participants without regard to Tax Code limits, offset by the benefit that can be provided under the DB Plan. (1) The Covered Compensation Table in the Tax Code. (2) The Social Security Taxable Wage Base. | | |||||||
| | | | | | | | | | | | | |
| | | 2016 Proxy Statement41 |
| | Participant Group | | Pension Benefit Formula | | | |||||||||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| NON-GRANDFATHERED CHOICE Non-Grandfathered Choice Employees are employees who were eligible for the plan prior to January 1, 2006 and will receive the greater of the benefit provided under the Traditional Benefit Formula or the Cash Balance Formula. Any employees hired or that reenter the plan after December 31, 2001 are only eligible for the Cash balance Formula. | Defined Benefit Plan (Traditional Formula) 35% of Average Compensation below the Integration Level plus 55% of Average Compensation above the Integration Level. Cash Balance Plan - The Annual Pay Credits are calculated using the table below | |||||||||||||||||||||||||
| Age + Service | Annual Pay Credit | |||||||||||||||||||||||||
| Years (Points) | Contribution on all Pay | Contribution on Pay above Taxable Wage Base | ||||||||||||||||||||||||
| < 40 | 3.00% | 1.50% | ||||||||||||||||||||||||
| 40 – 59 | 4.00% | 2.00% | ||||||||||||||||||||||||
| 60 – 79 | 5.50% | 2.75% | ||||||||||||||||||||||||
| 80 or more | 7.00% | 3.5% | ||||||||||||||||||||||||
| • Mr. Houston's retirement benefit will be thegreater of the Traditional or Cash Balance Formulas. • Mr. Valdés's retirement benefit will be - the Cash Balance Formula. Mr. Valdés will also have a small benefit under the Traditional Formula due to service prior to January 1, 2006. • Mr. McCaughan's retirement befit will be determined under the - Cash Balance Formula. As of January 1, 2010, he no longer accrues benefits under this plan. | NQ Defined Benefit The NQDB benefit formula for employees hired before January 1, 2002, who are Non-Grandfathered Choice Participants is: • The traditional or cash balance pension plan benefit for Non-Grandfathered Choice Participants (whichever is greater) without regard to Tax Code limits, offset by the benefit that can be provided under the DB Plan. A different benefit formula was in effect until January 1, 2006, for the DB Plan and NQDB. For employees that were active participants of the plan on December 31, 2005, their accrued benefit on any date will not be less than their accrued benefit determined as of December 31, 2005. Reduction if payments start earlier than Normal Retirement Age (Traditional Benefit Formula only): • The Company subsidizes early retirement if the Executive remains employed until Early Retirement Age (age 57 with 10 years of service), which is the earliest date an employee may begin receiving retirement benefits. • The subsidy is less for benefits accrued after December 31, 2005. If the Executive retires after Early Retirement Age but before Normal Retirement Age (age 65), those benefits received by the Executive prior to age 62 are reduced to reflect payments are beginning at an earlier age. The early retirement benefits range from 75% at age 57 to 95% at age 61 (and 97% at age 64 for benefits earned after December 31, 2005). • If the Executive terminates employment before reaching Early Retirement Age, Principal Life does not subsidize early retirement. The early retirement benefits range from 58.6% at age 57 to 92.8% at age 64. • Benefits accrued as of December 31, 2005 receive a Cost of Living adjustment after retirement benefits commence. | |||||||||||||||||||||||||
| | | | | | | | | | | | | |
| | Participant Group | | | Pension Benefit Formula | | |||||||
| | | | | | | | | | | | | |
| | Non Grandfathered Participants Non Grandfathered Participants will receive the greater of the benefit provided under the Traditional Benefit Formula or the Cash Balance Formula. | | | Defined Benefit Plan ("DB") (Traditional Formula) 35% of Average Compensation below the Integration Level plus 55% of Average Compensation above the Integration Level. Cash Balance Plan—The Annual Pay Credits are calculated using the table below | | |||||||
| | | | | | | | | | | | | |
| | | | | Annual Pay Credit | | |||||||
| | | | Age+ Service Years (Points) | | Contribution on All Pay | | Contribution on Pay above Taxable Wage Base(2) | | ||||
| | | | | | | | | | | | | |
| | | | < 40 | | 3.00% | | 1.50% | | ||||
| | | | | | | | | | | | | |
| | | | 40 – 59 | | 4.00% | | 2.00% | | ||||
| | | | | | | | | | | | | |
| | | | 60 – 79 | | 5.50% | | 2.75% | | ||||
| | | | | | | | | | | | | |
| | | | 80 or more | | 7.00% | | 3.5% | | ||||
| | | | | | | | | | | | | |
| | • Mr. Houston's retirement benefit will be thegreater of the Traditional or Cash Balance Formulas. • Mr. Valdés retirement benefit will be the Cash Balance Formula. Mr. Valdés will also have a small benefit under the Traditional Formula due to service prior to January 1, 2006. • Mr. McCaughan's retirement benefit will be the Cash Balance Formula. He has not accrued any benefits under this plan since January 1, 2010. • Mr. Dunbar's retirement benefit will be the Cash Balance Formula. Mr. Dunbar will also have a benefit under the Traditional Formula due to service prior to January 1, 2011. | | | NQ Defined Benefit The NQDB benefit formula for Non Grandfathered Participants hired before January 1, 2002 is: • The traditional or cash balance pension plan benefit for Non Grandfathered Choice Participants (whichever is greater) without regard to Tax Code limits, offset by the benefit that can be provided under the DB Plan. For employees who were active participants in the plan on December 31, 2005, their accrued benefit will not be less than their accrued benefit determined as of that date. For both groups, there is a reduction if payments start earlier than Normal Retirement Age (Traditional Benefit Formula only): • Principal subsidizes early retirement if the Named Executive Officer remains employed until Early Retirement Age (age 57 with 10 years of service), which is the earliest date an employee may begin receiving retirement benefits. • The early retirement benefits for Grandfathered Choice Participants (and Non Grandfathered Choice Participants for benefits accrued prior to January 1, 2006) range from 75% at age 57 to 100% at age 62. The early retirement benefits for Non Grandfathered Choice Participants for benefits accrued after December 31, 2005 range from 75% at age 57 to 97% at age 64. • If the Named Executive Officer terminates employment before reaching Early Retirement Age, Principal Life does not subsidize early retirement. The early retirement benefits range from 58.6% at age 57 to 92.8% at age 64. • Benefits under the Traditional Formula are eligible for a Cost of Living Adjustment (COLA) after retirement benefits begin. For Non Grandfathered Participants only benefits accrued as of December 31, 2005 receive this adjustment. The COLA is based on the Consumer Price Index. | | |||||||
| | | | | | | | | | | | | |
| 422016 Proxy Statement | | |
Pension Distributions
Participants receive an annuity under the traditional benefit formula in the DB Plan. The earliest this benefit may be received is at age 57 with ten years of service. The qualified cash balance benefit formula in the DB Plan allows for benefits in the form ofas an annuity or as a lump sum (payable immediately upon termination/retirement or deferred to a later date).sum.
NQDB benefits may be paid as a lump sum at termination/retirement, or as an annuity at the later of age 57 or termination/retirement. All benefit payments for specified employees, including the Named Executive Officers, will be made no earlier than six months after termination, as required by Section 409A of the Tax Code.annuity. Distributions may also be allowed at death or a change of control. For participants in the plan prior to January 1, 2010, a mandatory payment occurs at age 65, and these participants couldthey may elect for benefits to be paid to thempayments on a specified date they specified between age 60 and 65.
Pension Benefits
| | | | | | | | | | |
| Named Executive Officer | | Plan Name | | Number of Years Credited Service(1) | | Present Value of Accumulated Benefit at Normal Retirement Age(2) | | Payments During Last Fiscal Year | |
|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | |
Zimpleman | | Qualified Pension | | 42 | | $ | 2,169,802 | | $0 |
| | NQDB | | | | $ | 24,422,262 | | $0 |
| | | | | | | | | | |
Houston | | Qualified Pension | | 31 | | $ | 799,735 | | $0 |
| | NQDB | | | $ | 2,959,958 | | $0 | ||
| | | | | | | | | | |
Lillis | | Qualified Pension | | 33 | | $ | 2,112,923 | | $0 |
| | NQDB | | | | $ | 4,992,360 | | $0 |
| | | | | | | | | | |
Dunbar | | Qualified Pension | | 29 | | $ | 988,056 | | $0 |
| | NQDB | | | $ | 1,602,358 | | $0 | ||
| | | | | | | | | | |
McCaughan | | Qualified Pension | | 7 | | $ | 205,699 | | $0 |
| | NQDB | | | | $ | 1,699,619 | | $0 |
| | | | | | | | | | |
Valdés | | Qualified Pension | | 5 | | $ | 139,421 | | $0 |
| | NQDB | | | $ | 289,164 | | $0 | ||
| | | | | | | | | | |
| | | 2016 Proxy Statement43 |
Non-Qualified Non Qualified Deferred Compensation
| | Named Executive Officer | | Executive Contributions in Last Fiscal year (1) | | Principal Life Contributions in Last Fiscal Year (2) | | Aggregate Earnings in Last Fiscal Year | | Aggregate Withdrawals / Distributions | | Aggregate Balance at Last Fiscal Year End (3) | | ||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zimpleman | $198,950 | $59,685 | $296,295 | $0 | $2,386,118 | |||||||||||||||||||
| Lillis | $34,320 | $17,160 | $49,977 | $0 | $365,845 | |||||||||||||||||||
| Houston | $76,552 | $57,414 | $156,985 | $0 | $1,193,513 | |||||||||||||||||||
| McCaughan | $0 | $0 | $330,299 | $0 | $2,106,907 | |||||||||||||||||||
| Valdés | $24,561 | $18,421 | 1,955 | $0 | $44,937 |
| | | | | | | | | | | | | ||||||
| Named Executive Officer | | Executive Contributions in Last Fiscal year(1) | | Principal Life Contributions in Last Fiscal Year(2) | | Aggregate Earnings in Last Fiscal Year | | Aggregate Withdrawals / Distributions | | Aggregate Balance at Last Fiscal Year End(3) | | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | ||||||
Zimpleman | | | $ | 313,154 | | | $ | 91,604 | | $ | –117,418 | | $0 | | $ | 4,137,245 | |
| | | | | | | | | | | | | ||||||
Houston | | | $ | 135,806 | | | $ | 88,354 | | $ | –28,416 | | $0 | | $ | 2,158,240 | |
| | | | | | | | | | | | | ||||||
Lillis | | | $ | 70,281 | | | $ | 28,586 | | $ | –8,294 | | $0 | | $ | 780,348 | |
| | | | | | | | | | | | | ||||||
Dunbar | | | $ | 51,876 | | | $ | 34,845 | | $ | –31,685 | | $0 | | $ | 401,333 | |
| | | | | | | | | | | | | ||||||
McCaughan | | | $ | 0 | | | $ | 0 | | $ | –201,994 | | $0 | | $ | 2,470,085 | |
| | | | | | | | | | | | | ||||||
Valdés | | | $ | 68,154 | | | $ | 50,470 | | $ | –5,743 | | $0 | | $ | 384,436 | |
| | | | | | | | | | | | | ||||||
| | Named Executive Officer | | Employee Deferral Prior to 1/1/2012 | | Principal Life Match Prior to 1/1/2012 | | Total | | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zimpleman | $1,417,002 | $351,349 | $1,768,351 | |||||||||||||
| Lillis | $147,066 | $68,899 | $215,965 | |||||||||||||
| Houston | $477,030 | $276,603 | $753,633 | |||||||||||||
| McCaughan | $998,343 | $581,568 | $1,579,911 | |||||||||||||
| Valdés | $0 | $0 | $0 |
| | | | | | | | | |||||
| Named Executive Officer | | Employee Deferral Prior to 1/1/2015 | | Principal Life Match Prior to 1/1/2015 | | Total | | |||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | |||||
Zimpleman | | | $ | 2,109,171 | | | $ | 556,314 | | $ | 2,665,485 | |
| | | | | | | | | |||||
Houston | | | $ | 750,676 | | | $ | 468,712 | | $ | 1,219,388 | |
| | | | | | | | | |||||
Lillis | | | $ | 296,305 | | | $ | 136,691 | | $ | 432,996 | |
| | | | | | | | | |||||
Dunbar | | | $ | 159,250 | | | $ | 100,594 | | $ | 259, 844 | |
| | | | | | | | | |||||
McCaughan | | | $ | 998,343 | | | $ | 581,568 | | $ | 1,579,911 | |
| | | | | | | | | |||||
Valdés | | | $ | 141,929 | | | $ | 101,757 | | $ | 243,686 | |
| | | | | | | | | |||||
Qualified 401(k) Plan and Excess Plan
The qualified 401(k) plan allows employees to defer one to 15% of base salary (one to 100% if not contributing to the Excess Plan) and one to 100% of awards under the Annual Incentive Plan or PrinPay Plan up to the limits imposed by the Tax Code. Principal Life provides matching cash contributions of (i) 50% of deferrals, up to a maximum deferral of six percent of the employee's pay (base salary and annual bonus) for Grandfathered Choice Participants and (ii) 75% of deferrals, up to a maximum of eight percent of the employee's pay (base salary and annual bonus) for all other participants.
The qualified 401(k) plan offers 20 investment options (including the Company's Common Stock) and investment return is based on the participant's investment direction. Distributions from the plan are allowed at various times including at termination of employment, death and disability. Vesting in the qualified plan is a three-year cliff schedule.
The Excess Plan allows for deferral of one to 15% of base salary and deferral of one to 100% of awards under the Annual Incentive Plan or PrinPay Plan. Principal Life provides matching cash contributions identical to those in the 401(k) Plan, without regard to the limitations on such contributions imposed under the Tax Code. Plan participants can direct their investments and the participants' investment returns are based on their investment selections. Deferrals and matching contributions in the Excess Plan are immediately vested. Distributions from the Excess Plan are allowed at various times, including termination of employment, death, specified date, change of control, mandatory distribution at age 65 and in the event of an unforeseeable emergency.
| | | | | | | | | | | | | |
| | Plan Feature | | | Qualified 401(k) Plan | | | Excess Plan | | ||||
| | | | | | | | | | | | | |
| | Deferrals | | | 1-15% of base salary and up to 100% of annual incentive compensation awards (1-100% of base pay if not contributing to the Excess Plan) up to the limits imposed by the Tax Code. | | | 1-15% of base salary and up to 100% of annual incentive compensation awards. | | ||||
| | | | | | | | | | | | | |
| | Investment Options | | | There are 20 investment options and investment and investment return is based on the participant's investment direction. | | | The investment options are listed on page 45 and investment return is based on the participant's investment direction. | | ||||
| | | | | | | | | | | | | |
| | Distributions | | | Allowed at various times including termination, death and disability. | | | Allowed at various times including termination, death, specified date, change of control, unforeseen emergency and mandatory payment at age 65. | | ||||
| | | | | | | | | | | | | |
| | Vesting | | | 3 year cliff | | | Immediate | | ||||
| | | | | | | | | | | | | |
| 442016 Proxy Statement | | |
The following funds are the investment options available to all participants in the Excess Plan:
| | | | | | | | ||||||
| | ||||||||||||
| Investment Option | | 1 Year Rate Of Return (12/31/ | | |||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | ||||||
| | Principal Equity Income Institutional Fund | | –3.88% | | | |||||||
| | Principal LargeCap Value Institutional Fund | | –0.93% | | ||||||||
| | | Principal LargeCap S&P 500 Index Institutional Fund | | 1.22% | | | ||||||
| | Principal LargeCap Growth Institutional Fund | | 4.91% | | ||||||||
| | | Principal LargeCap Growth I Institutional Fund | | 8.17% | | | ||||||
| | | 1.47% | | |||||||||
| | ||||||||||||
| | Principal SmallCap Value II Institutional Fund | | –4.01% | | | |||||||
| | Principal SmallCap S&P 600 Index Institutional Fund | | –2.22% | | ||||||||
| | | Principal Small Cap Growth I Institutional Fund | | 1.19% | | | ||||||
| | Principal Real Estate Securities Institutional Fund | | 4.22% | | ||||||||
| | | Principal International Emerging Markets Institutional Fund | | –13.63% | | | ||||||
| | Principal Diversified International Institutional Fund | | –0.36% | | ||||||||
| | | Principal LifeTime Strategic Income Institutional Fund | | –0.87% | | | ||||||
| | Principal LifeTime 2010 Institutional Fund | | –1.06% | | ||||||||
| | | Principal LifeTime 2020 Institutional Fund | | –1.17% | | | ||||||
| | Principal LifeTime 2030 Institutional Fund | | –0.95% | | ||||||||
| | | Principal LifeTime 2040 Institutional Fund | | –0.79% | | | ||||||
| | Principal LifeTime 2050 Institutional Fund | | –0.74% | | ||||||||
| | | Principal LifeTime 2060 Institutional Fund | | –0.80% | | | ||||||
| | Principal Money Market Institutional Fund | | 0.00% | | ||||||||
| | | Principal Core Plus Bond | | –0.30% | | | ||||||
| | Principal Inflation Protection Institutional Fund | | –2.15% | | ||||||||
| | | Principal Government & High Quality Bond Institutional Fund | | 0.90% | | | ||||||
| | Principal Financial Group, Inc. Employer Stock Fund | | –10.51% | | ||||||||
| | | Principal Diversified Real Asset Institutional Fund | | –12.40% | | | ||||||
| | | | | | | |
PAYMENTS UPON TERMINATION
Employment Agreement
The Company hasPrincipal had an employment agreement dated May 1, 2008, with Mr. Zimpleman for his service as the Company's CEO. The employment agreement hadwith an initial term through May 1, 2011, and the term of the agreement automatically extendsextended to create a new one-yearone year term unless either Mr. Zimpleman or the Company notifies the otherparty provided notice of thean intention not to extend the agreement. This agreement terminated on January 4, 2016, upon Mr. Zimpleman's retirement. Mr. Zimpleman iswas entitled to benefits, including a lump sum severance payment equal to two times the sum of his annual base salary and target annual bonus, if his employment involuntarily terminatesterminated under certain circumstances other than upon a Change of Control. The severance provisions were based on market practice and did not impactaffect the decisions made regarding other components of his compensation. Mr. Houston does not have an employment contract.
Messrs. Houston, Dunbar, Lillis and Valdés are eligible for severance under the Company's severance plan if they are terminated as a result of lay-offs,layoffs, position elimination or similar reasons. Executives do not receive severance benefits if they take a comparable job with Principal Life, fail to sign a release of claims against Principal Life, and/or other specified reasons. The benefit payable under the severance plan is the greater of one week of base salary for each year of service with Principal Life or two weeks of base salary for each $10,000 of annual base salary (rounded to the nearest $10,000). Each of the Named Executive Officers would be eligible for 52 weeks of severance under this plan. The severance plan has a minimum benefit of six weeks and a maximum benefit of 52 weeks of base pay, and also provides for three months of reimbursement of premium for continuation of medical, dental and vision insurance under the Retiree plan if the Executive is eligible to retire or COBRA if the Executive is not eligible to
| | | 2016 Proxy Statement45 |
retire. In circumstances in which the severance plan does not apply, the Human Resources Committee would determine whether any severance benefits would be paid to Messrs. Houston, Lillis and Valdés.
An agreement made with Mr. McCaughan when he was hired provides that if he is terminated without "Cause", as that term is defined in the Change of Control Employment Agreements (see below), he will be paid (i) one year's base compensation and one year's annual bonus at target, and (ii) all other accrued entitlements, in accordance with the terms of the relevant plan.
Pursuant to Mr. Zimpleman's employment agreement, the lump sum severance amount is two times the sum of his annual base salary and target annual bonus.
The following table illustrates the severance or contractual benefits that the Named Executive Officers would have received had they qualified for such benefits on December 31, 2012.2015:
| | Named Executive Officer | | Severance | | Outplacement Services | | COBRA Reimbursement | | Total | | ||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zimpleman | $4,500,000 | $10,000 | $3,038 | $4,513,038 | ||||||||||||||||
| Lillis | $475,000 | $10,500 | $1,691 | $487,191 | ||||||||||||||||
| Houston | $550,000 | $10,500 | $4,389 | $564,889 | ||||||||||||||||
| McCaughan | $2,400,000 | $10,500 | $5,122 | $2,415,622 | ||||||||||||||||
| Valdés | $525,000 | $10,500 | $4,240 | $539,740 |
| | | | | | | | | | | ||||||
| Named Executive Officer | | Severance | | Outplacement Services | | COBRA Reimbursement | | Total | | ||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | ||||||
| Zimpleman | | $ | 6,000,000 | | | $ | 10,000 | | | $ | 0 | | $ | 6,010,000 | |
| | | | | | | | | | | ||||||
| Houston | | $ | 775,000 | | | $ | 10,500 | | | $ | 5,243 | | $ | 790,743 | |
| | | | | | | | | | | ||||||
| Lillis | | $ | 551,000 | | | $ | 10,500 | | | $ | 2,058 | | $ | 563,558 | |
| | | | | | | | | | | ||||||
| Dunbar | | $ | 473,000 | | | $ | 10,500 | | | $ | 5,101 | | $ | 488,601 | |
| | | | | | | | | | | ||||||
| McCaughan | | $ | 2,612,000 | | | $ | 0 | | | $ | 0 | | $ | 2,612,000 | |
| | | | | | | | | | | ||||||
| Valdés | | $ | 580,000 | | | $ | 10,500 | | | $ | 7,791 | | $ | 598,291 | |
| | | | | | | | | | | ||||||
The Company entered intoPrincipal has Change of Control Employment Agreements in 2010 with each of the Named Executive Officers which replaced prior agreements.except Mr. Zimpleman, whose agreement terminated upon his retirement on January 4, 2016. These Agreements have a term of two years and will automatically renew for successive one-yearone year periods unless the CompanyPrincipal provides a notice electing not to extend the term. If during the term of these agreements a "Pre-Change of Control Event" or a "Change of Control"
occurs, the term of the agreements will extend until the second anniversary of a Change of Control. These agreements provide that if payments upon termination of employment related to a Change of Control would be subjected to the excise tax imposed by Section 4999 of the Code, and if reducing the amount of the payments would result in greater benefits to the Named Executive Officer (after taking into consideration the payment of all income and excise taxes that would be owed as a result of the Change of Control payments), the CompanyPrincipal will reduce the Change inof Control payments by the amount necessary to maximize the benefits received, by the Executive Officer, determined on an after tax basis. In addition to the benefit of having to make fewer payments, if the benefits payable to any of the Named Executive Officers are reduced, all of the payments will be eligible to be deducted by the Company for federal income tax purposes.
The severance and other benefits provided under these agreements will be available to covered ExecutivesNamed Executive Officers upon a Change of Control if their employment is terminated following or in connection with a Pre-Change of Control Event, or if any third party ends or adversely changes the terms and conditions of the Executive'stheir employment. For an Executivea termination prior to a Change of Control, such termination or change in employment is deemed to have occurred immediately following the date on which a Change of Control occurs, rather than at the time the termination or change in employment actually occurs.
Under these Agreements, a "Pre-Change of Control Event" means:
Under these Agreements, a Change of Control means:
| 462016 Proxy Statement | | |
These Agreements also provide:
The benefits the Executive receivesreceived upon a Change of Control without termination of employment include the current vested account balance in the Excess Plan and the current vested benefit in the NQDB, according to change of control distribution elections on file for these plans.
For purposes of the Agreements, "Good Reason" means negative changes in the terms and conditions of the Executive'sNamed Executive Officer's employment, consisting of:
"Cause""Cause" means any one or more of the following:
The benefits to be paid or provided under the Agreements if termination occurs for Good Reason or without Cause consist of:
In addition, until the third anniversary of the date of the Executive'sNamed Executive Officer's termination, (the second anniversary for Mr. Lillis), the Executivehe and his eligible family members will receive medical, prescription drug, dental, vision, group term life insurance, and accidental death and dismemberment coverages comparable to those received by Executives whose employment continues.
| | | 2016 Proxy Statement47 |
Pursuant to these Agreements, Mr. Zimpleman has agreed that for 18 months, and the other Named Executive Officers agreed that for one year following a termination of employment that results in the Named Executive Officer receiving the severance benefits described above, the Executivehe will not work for a competing business, solicit employees or customers, or interfere with the relationships of the Company, its affiliates and subsidiaries with their employees or customers.
The following table describes the potential payments upon involuntary termination without Cause or voluntary termination for Good Reason following a Change of Control. The calculations provided in the table assume:
| | Named Executive Officer | | Cash Severance (1) | | Spread on Previously Unvested Options | | Value of Previously Unvested Restricted Stock & Performance Shares (2) | | Benefits Continuation (3) | | Accelerated Pension Benefit (4) | | Total Termination Benefits (before taxes) | | ||||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zimpleman | $4,500,000 | $493,688 | $4,477,298 | $41,446 | $0 | $9,512,432 | ||||||||||||||||||||||
| Lillis | $1,900,000 | $125,980 | $1,124,772 | $24,386 | $0 | $3,175,138 | ||||||||||||||||||||||
| Houston | $2,475,000 | $238,955 | $1,781,245 | $55,921 | $0 | $4,551,121 | ||||||||||||||||||||||
| McCaughan | $4,800,000 | $248,975 | $2,051,158 | $51,042 | $0 | $7,151,175 | ||||||||||||||||||||||
| Valdés | $1,837,500 | $102,000 | $856,769 | $55,921 | $0 | $2,852,190 |
| | | | | | | | | | | | | | | ||||||||
| Named Executive Officer | | Cash Severance(1) | | Spread on Previously Unvested Options | | Value of Previously Unvested Restricted Stock & Performance Shares(2) | | Benefits Continuation(3) | | Accelerated Pension Benefit(4) | | Total Termination Benefits (before taxes) | | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | ||||||||
| Zimpleman | | $ | 6,000,000 | | $ | 977,772 | | $ | 9,857,727 | | | $ | 46,109 | | | $ | 0 | | $ | 16,881,608 | |
| | | | | | | | | | | | | | | ||||||||
| Lillis | | $ | 2,204,000 | | $ | 301,543 | | $ | 2,814,848 | | | $ | 31,334 | | | $ | 0 | | $ | 5,351,725 | |
| | | | | | | | | | | | | | | ||||||||
| Houston | | $ | 6,975,000 | | $ | 431,152 | | $ | 4,230,864 | | | $ | 61,050 | | | $ | 0 | | $ | 11,698,066 | |
| | | | | | | | | | | | | | | ||||||||
| McCaughan | | $ | 5,224,000 | | $ | 401,720 | | $ | 5,414,827 | | | $ | 48,668 | | | $ | 0 | | $ | 11,089,215 | |
| | | | | | | | | | | | | | | ||||||||
| Valdés | | $ | 2,030,000 | | $ | 258,024 | | $ | 3,314,711 | | | $ | 61,050 | | | $ | 0 | | $ | 5,663,785 | |
| | | | | | | | | | | | | | | ||||||||
| Dunbar | | $ | 1,608,200 | | $ | 130,436 | | $ | 1,241,700 | | | $ | 61,050 | | | $ | 0 | | $ | 3,041,386 | |
| | | | | | | | | | | | | | | ||||||||
| 482016 Proxy Statement | | |
PROPOSAL THREE – ADVISORY VOTE TO APPROVE EXECUTIVE COMPENSATION
Proposal Two—Advisory Vote to Approve Executive Compensation
Say on pay votes will be held annually until the next vote on the frequency of this advisory vote is conducted in 2017, or until the Board determines that a different frequency would be in the best interests of the Company's shareholders.
The Company's Executive compensation program is designed to reward Executives who contribute to the achievement of the Company's business objectives and to attract, retain and motivate talented Executives to perform at the highest level and contribute significantly to the Company's success. The program is designed to tie the delivery of Executive compensation to the achievement of the Company's long and short term financial and strategic goals and to align the interests of Executives and shareholders. The purposes and objectives of, and the rationale behind, the Company's compensation program are described in significant detail in the Compensation Discussion and Analysis, starting on page 26.21. Of particular note are the following policies and practices aligned with recognized corporate governance best practice:
Shareholders are being asked to vote on the Company's compensation policies and procedures for the Named Executive Officers, as described in the Compensation Discussion and Analysis and the compensation tables and the accompanying narratives in this Proxy Statement.
This vote is not intended to address any specific item of compensation, but the Company's overall compensation related to our Named Executive Officers. Because your vote is advisory, it will not be binding on the Board and will not overrule any decision by the Board or require the Board to take any action. However, the Human Resources Committee, which is responsible for designing and administering the Company's executiveExecutive compensation program, values shareholder opinions and will consider the outcome of the vote when making future compensation decisions for the Named Executive Officers.
This proposal, commonly known as a "say on pay" proposal, gives shareholders the opportunity to vote on an advisory, non-bindingnonbinding basis to approve the compensation of our Named Executive Officers as disclosed in this proxy statement pursuant to SEC rules through the following resolution:
RESOLVED, that the compensation paid to the Company's Named Executive Officers, as disclosed pursuant to Item 402 of Regulation S-K, including the Compensation Discussion and Analysis, compensation tables and narrative discussion, is hereby approved.
The Board of Directors recommends that shareholders vote "For" this resolution.
| | | 2016 Proxy Statement49 |
PROPOSAL FOUR – RATIFICATION OF APPOINTMENT OF INDEPENDENT Proposal Three—Ratification of Appointment ofPUBLIC REGISTERED ACCOUNTANTS
Independent Registered Public Accountants
Subject to shareholder ratification, the Audit Committee has appointed the firm of Ernst & Young LLP to audit the consolidated financial statements of the Company for the fiscal year ending December 31, 2013 The Company or2016. In order to assure continuing auditor independence, the Audit Committee periodically considers the advisability and potential impact of selecting a different independent external audit firm. Ernst & Young LLP has served as the Company's independent registered public accountant since it became a publicly traded company in 2001, and Principal Life has used Ernst & Young LLP as its independent registered public accountantsaccountant for several years.many years prior thereto. The Audit Committee and the Board of Directors believe that the continued retention of Ernst & Young LLP is in the best interest of the Company and its shareholders. Ratification of the appointment of the independent registered public accountants requires the affirmative vote of a majority of the shares represented at the meeting and voting on the matter. If the shareholders do not ratify this appointment, the Audit Committee will consider the matter of the appointment of the independent registered public accountants.
RESOLVED, that the appointment of Ernst & Young, LLP to audit the consolidated financial statements of the Company for the fiscal year ending December 31, 20132016 be ratified.
The Board of Directors recommends that shareholders vote "For" this resolution.
Representatives of Ernst & Young LLP will be present at the Annual Meeting, will be given an opportunity to make a statement if they so desire and will be available to respond to appropriate questions relating to the audit of the Company's 20122015 consolidated financial statements.
Audit Fees
The aggregate fees billed by the Company's independent registered public accounting firm in 20122015 and 20112014 for professional services rendered in connection with regulatory audits in accordance with US GAAP, statutory, or foreign accounting principles; consultation on matters addressed during these audits; review of documents filed with regulators including the SEC; other engagements required by statute; or engagements that generally only the Company's independent registered public accounting firm can reasonably provide, such as comfort letters or consents, were approximately $7,464,000$10,352,000 in 20122015 and $7,362,000$8,984,000 in 2011.2014.
Audit-Related Fees
Audit Related Fees
The aggregate fees billed by the Company's independent registered public accounting firm in 20122015 and 20112014 for professional services rendered in connection with audit-relatedaudit related services such as financial statement audits of employee benefit plans, financial statement audits not required by statute or regulation, accounting consultations in connection with proposed transactions or emerging accounting standards, and other attest and related advisory services not required by statute or regulation weretotaled approximately $1,083,000$1,397,000 in 20122015 and $1,185,000$1,530,000 in 2011.2014
Tax Fees
The aggregate fees billed by the Company's independent registered public accounting firm for professional services rendered in connection with tax services consisting primarily of tax consultations related to the Foreign Account Tax Compliance Act and other compliance totaled approximately $1,911,000$88,000 in 20122015 and $409,000$223,000 in 2011.2014. Tax compliance generally involves preparation, assistance or attestation related to tax filings in various domestic and non-domestic jurisdictions. Tax consultation generally involves assistance in connection with tax audits, filing appeals, and compliance with new tax-relatedtax related regulations.
All Other Fees
The aggregate fees billed by the Company's independent registered public accounting firm for professional services rendered in connection with other services consisting primarily consisted of a construction cost evaluation,
software licensing and an enterprise risk management evaluation (only in 2011), totaled approximately $27,500$27,000 in 20122015 and $275,800$3,000 in 2011.2014.
The Audit Committee has adopted a policy on auditor independence that calls for the Committee to preapprove any service the Company's independent registered public accountant proposes to provide to the Company, its majority-ownedmajority owned subsidiaries, employee benefit plans or affiliates. The policy also calls for the Committee to preapprove any audit service any independent auditor proposes to provide to these entities. The purpose of the policy is to assure that the provision of such services does not impair any auditor's independence. The policy provides for the general preapproval of specific types of Audit and Audit-RelatedAudit Related services and fees up to an established individual
| 502016 Proxy Statement | | |
engagement and annual threshold. The policy requires specific preapproval of all other services. Pursuant to the policy, each quarter CompanyPrincipal management presents to the Committee a detailed description of each particular service that meets the definition of services that have been generally approved and each service for which specific preapproval is sought, and an estimate of fees for each service. The policy accords the Audit Committee Chair authority to preapprove services and fees for those services that arise between regularly scheduled meetings of the Audit Committee. In considering whether to preapprove the provision of non-auditnon audit services by the independent registered public accountant, the Audit Committee will consider whether the services are compatible with the maintenance of the independent registered public accountant's independence. The Audit Committee does not delegate its responsibilities to preapprove services performed by an independent auditor to management.
The Audit Committee did not approve the services described above under the captions "Audit-Related"Audit Related Fees," "Tax Fees" and "All Other Fees" by utilizing thede minimis exception of SEC Rule 2-01(c)(7)(i)(C).
| | | 2016 Proxy Statement51 |
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Security Ownership of Certain Beneficial Owners and Management
Except as otherwise indicated below, the following table shows, as of March 18, 2013,14, 2016, beneficial ownership of shares of Common Stock by (i) the only shareholdershareholders known to the Company to beneficially own more than 5% of the outstanding shares of Common Stock, (ii) each Director, (iii) each Named Executive Officer and (iv) all current Directors and executive officersExecutive Officers as a group. Except as otherwise indicated below, each of the individuals named in the table has sole voting and investment power, or shares such powers with his or her spouse, for the shares set forth opposite his or her name.
| | Name | | Number of Shares Beneficially Owned(1) | | Percent of Common Stock Outstanding | | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| The Bank of New York Mellon Corporation (2) One Wall Street, 31st Floor New York, New York 10286 | 18,742,133 | 6.38 | ||||||||||||
| Nippon Life Insurance Company(3) 3-5-12 Imabashi Chuo-ku Osaka, 541-8501, Japan | 18,137,000 | 6.18 | ||||||||||||
| Capital Research Global Investors (4) 333 South Hope Street Los Angeles, California 90071 | 17,405,962 | 5.93 | ||||||||||||
| The Vanguard Group (5) 100 Vanguard Boulevard Malvern, Pennsylvania 19355 | 16,960,533 | 5.77 | ||||||||||||
| Betsy J. Bernard | 22,638 | * | ||||||||||||
| Jocelyn Carter-Miller | 22,974 | * | ||||||||||||
| Gary E. Costley | 30,290 | * | ||||||||||||
| Michael T. Dan | 26,827 | * | ||||||||||||
| Dennis H. Ferro | 6,271 | |||||||||||||
| C. Daniel Gelatt (6) | 326,891 | * | ||||||||||||
| Sandra L. Helton | 30,237 | * | ||||||||||||
| Richard L. Keyser | 25,959 | * | ||||||||||||
| Luca Maestri | 1,050 | * | ||||||||||||
| Arjun K. Mathrani | 1,885 | * | ||||||||||||
| Elizabeth E. Tallett | 26,567 | * | ||||||||||||
| Daniel J. Houston (7) | 421,754 | * | ||||||||||||
| Terrance J. Lillis (7) | 166,830 | * | ||||||||||||
| James P. McCaughan | 783,114 | * | ||||||||||||
| Luis Valdes | 135,255 | |||||||||||||
| Larry D. Zimpleman | 1,298,610 | * | ||||||||||||
| All Directors and Executive Officers as a group (23 persons) | 4,912,208 | 1.67 | ||||||||||||
| | | | | | | ||||
| Name | | Number of Shares Beneficially Owned(1) | | Percent of Common Stock Outstanding | | ||||
|---|---|---|---|---|---|---|---|---|---|
| | | | | | | ||||
The Vanguard Group(2) | | | 24,297,072 | | | 8.29 | | ||
100 Vanguard Boulevard | | | | | | ||||
| | | | | | | ||||
Wellington Management Group LLP(3) | | | 19,825,898 | | | 6.77 | | ||
c/o Wellington Management Company LLP | | | | | | ||||
| | | | | | | ||||
Nippon Life Insurance Company(4) | | | 18,137,000 | | | 6.17 | | ||
3-5-12 Imabashi | | | | | | ||||
| | | | | | | ||||
BlackRock Inc.(5) | | | 15,747,569 | | | 5.40 | | ||
55 East 52nd Street | | | | | | ||||
| | | | | | | ||||
Capital Research Global Investors(6) | | | 9,000,600 | | | 3.10 | | ||
333 South Hope Street | | | | | | ||||
| | | | | | | ||||
Betsy J. Bernard | | | 33,493 | | | * | | ||
| | | | | | | ||||
Jocelyn Carter-Miller | | | 34,080 | | | * | | ||
| | | | | | | ||||
Gary E. Costley | | | 35,970 | | | * | | ||
| | | | | | | ||||
Michael T. Dan | | | 39,378 | | | * | | ||
| | | | | | | ||||
Dennis H. Ferro | | | 17,862 | | | * | | ||
| | | | | | | ||||
C. Daniel Gelatt(7) | | | 368,111 | | | * | | ||
| | | | | | | ||||
Sandra L. Helton | | | 41,092 | | | * | | ||
| | | | | | | ||||
Roger C. Hochschild | | | 304 | | | | | ||
| | | | | | | ||||
Richard L. Keyser | | | 0 | | | * | | ||
| | | | | | | ||||
Luca Maestri | | | 0 | | | * | | ||
| | | | | | | ||||
Blair C. Pickerell | | | 0 | | | * | | ||
| | | | | | | ||||
Elizabeth E. Tallett | | | 38,750 | | | * | | ||
| | | | | | | ||||
Timothy M. Dunbar | | | 148,682 | | | * | | ||
| | | | | | | ||||
Daniel J. Houston | | | 551,799 | | | * | | ||
| | | | | | | ||||
Terrance J. Lillis | | | 254,808 | | | * | | ||
| | | | | | | ||||
James P. McCaughan | | | 590,875 | | | * | | ||
| | | | | | | ||||
Luis Valdés | | | 207,916 | | | * | | ||
| | | | | | | ||||
Larry D. Zimpleman | | | 1,782,143 | | | * | | ||
| | | | | | | ||||
All Directors and Executive Officers as a group (24 persons) | | | 5,170,534 | | | 1.78 | | ||
| | | | | | | ||||
| 522016 Proxy Statement | | |
In addition to beneficial ownership of Common Stock, the Company's Directors and executive officersExecutive Officers also hold different forms of "stock units" that are not reported in the security ownership table but represent additional financial interests that are subject to the same market risk as Common Stock. These units include shares that may be acquired after May 17, 201313, 2016, pursuant to previously awarded stock options, RSUs, performance share units and non-transferable accounting-entrynontransferable accounting entry units such as phantom stock units issued pursuant to Company stock-basedstock based compensation and benefit plans. The value of such units is the same as the value of the corresponding number of shares of Common Stock.
See "Directors' Compensation" on pages 23-2517-19 for a discussion of the options and RSUs granted to Directors under the Principal Financial Group, Inc. 20052014 Directors Stock Plan and the phantom stock units credited to Directors who participate in the Deferred Compensation Plan for Non-EmployeeNon Employee Directors of Principal Financial Group, Inc. See "Compensation Discussion and Analysis" beginning on page 2621 for a discussion of the performance units credited to officers who defer receipt of awards under a long term performance plan, the options and RSUs granted under the 20102014 Stock Incentive Plan, and phantom stock units credited to officers that defer salary into an employer stock fund available under the Excess Plan.
As of March 18, 2013,14, 2016, the Directors and Executive Officers named in the security ownership table hold a pecuniary interest in the following number of units: Ms. Bernard, 4,846;2,535; Ms. Carter-Miller, 4,846;Carter Miller, 2,535; Dr. Costley, 11,584;9,832; Mr. Dan, 11,323;15,133; Mr. Ferro, 16,221;18,966; Dr. Gelatt, 4,846;2,535; Ms. Helton, 4,846;2,535; Mr. Hochschild, 5,404; Mr. Keyser, 4,846;0; Mr. Maestri, 4,846;2,582; Mr. Mathrani, 10,588;Pickerell, 1,725; Ms. Tallett, 9,714;8,523; Mr. Dunbar, 98,992; Mr. Houston, 162,292;292,292; Mr. Lillis, 106,025;136,697; Mr. McCaughan, 169,696;231,909; Mr. Valdes, 87,599;Valdés, 138,304; and Mr. Zimpleman, 377,545.14,232.
| | | 2016 Proxy Statement53 |
Section 16(a) Beneficial Ownership Reporting Compliance
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's Directors, Executive Officers and persons who own more than ten percent of a registered class of the Company's equity securities to file with the SEC and the New York Stock Exchange reports of ownership of the Company's securities and changes in reported ownership. Directors, Executive Officers and greater than ten percent shareholders are required by SEC rules to furnish the Company with copies of all Section 16(a) reports they file.
Based solely on a review of the reports furnished to the Company, or written representations from reporting persons that all reportable transactions were reported, the Company believes that during the fiscal year ended December 31, 2012,2015, the Company's Directors, Executive Officers and greater than ten percent owners timely filed all reports they were required to file under Section 16(a), except for one report for each of two Directors. The Companyone Director. Principal discovered that aone report for each of two DirectorsRoger C. Hochschild was inadvertently not timely filed to disclose fee deferrals into an account that tracksrestricted stock units granted by the performance of the Company's Common Stock in the Deferred Compensation Plan for Non-Employee Directors. The Directors involved were Dennis H. Ferro and Elizabeth E. Tallett.Company as director compensation.
Mr. Ferro and Ms. Tallett regularly defer fees into the Deferred Compensation Plan for Non-Employee Directors. The CompanyPrincpal undertakes to prepare Section 16(a) reportsrepors on behalf of its Directors and Executive Officers. A transition of duties and associated lack of communication within the Company caused the reportsreport to be inadvertently filed two business days after the two-day filing requirement for Section 16(a) reports.
| 542016 Proxy Statement | | |
APPENDIX A
Questions and Answers About the
Annual Meeting
PROPOSED AMENDED ARTICLE V OF THE COMPANY'S AMENDED AND RESTATEDCERTIFICATE OF INCORPORATION TO IMPLEMENT THE ANNUAL ELECTION OFDIRECTORS, AS EXPLAINED IN PROPOSAL TWO
Why didn't I receive a copy of the paper proxy materials? |
(new language is underlined; languageThe Securities and Exchange Commission ("SEC") rules allow companies to be deleted is stricken)deliver a notice of Internet availability of proxy materials to shareholders and provide Internet access to those proxy materials. Shareholders may obtain paper copies of the proxy materials free of charge by following the instructions provided in the notice of Internet availability of proxy materials.
ARTICLE VBOARD OF DIRECTORS;MANAGEMENT OF THE CORPORATION
Why did I receive notice of and access to this proxy statement? |
Section 1. Classified Board. The Directors of the Corporation, subject to the rights of the holders of shares of any class or series of Preferred Stock, shall be classified with respect to the time for which they severally hold office, into three classes, as nearly equal in number as possible, as shall be provided in the By-laws of the Corporation, one class ("Class I") whose initial term expires at the 2002 annual meeting of stockholders, another class ("Class II") whose initial term expires at the 2003 annual meeting of stockholders, and another class ("Class III") whose initial term expires at the 2004 annual meeting of stockholders, with each class to hold office until its successors are elected and qualified. At each annual meeting of stockholders of the Corporation, the date of which will be fixed pursuant to the By-Laws of the Corporation, and subject to the rights of the holders of shares of any class or series of Preferred Stock, the successors of the classBoard of Directors whose term expires at that meeting shall("Board") is soliciting proxies to be elected to hold office for a term expiringvoted at the annual meeting of stockholdersshareholders to be held on May 17, 2016, at 9:00 a.m., Central Daylight Savings Time, at 750 Park Street, Des Moines, Iowa, and at any adjournment or postponement of the meeting ("Annual Meeting"). When the Board asks for your proxy, it must send or provide you access to proxy materials that contain information required by law. These materials were first made available, sent or given to shareholders on April 7, 2016.
What is a proxy? |
It is your legal designation of another person to vote the stock you own. The other person is called a proxy. When you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. Principal has designated three of the thirdCompany's officers to act as proxies for the 2016 Annual Meeting: Timothy M. Dunbar, Executive Vice President and Chief Investment Officer; Terrance J. Lillis, Executive Vice President and Chief Financial Officer; and Karen E. Shaff, Executive Vice President, General Counsel and Secretary.
What will the shareholders vote on at the Annual Meeting? |
Will there be any other items of business on the agenda? |
Principal does not expect any other items of business because the deadline for shareholder proposals and nominations has passed. However, if any other matter should properly come before the meeting, the people authorized by proxy will vote according to their election.Directors elected to succeed those whose terms expiredbest judgment.
Who can vote at the Annual Meeting? |
Shareholders as of the close of business on March 22, 2016 ("Record Date") can vote at the annual meetingsAnnual Meeting.
How many votes do I have? |
You will have one vote for every share of Company common stock ("Common Stock") you owned on the Corporation's stockholders held in 2012 and 2013 shall hold office for a term expiring at the third annual meeting of stockholders following their respective elections. Directors elected at the annual meetings of the Corporation's stockholders in 2014 and 2015 shall each be elected at such meetings for one-year terms expiring at the respective next annual meeting of stockholders following their election.Record Date.
| | | 2016 Proxy Statement55 |
Section 2.Elimination of Classified Board.Commencing with the annual meeting of the Corporation's stockholders in 2016, the classification of the Board of Directors, as set forth in Article V, Section 1 of this Amended and Restated Certificate of Incorporation, shall cease. At the annual meeting of the Corporation's stockholders in 2016 and at each annual meeting of the Corporation's stockholders thereafter, each nominee for Director shall stand for election to a one-year term expiring at the next annual meeting of stockholders and until their respective successors shall have been duly elected and qualified, subject to prior death, resignation, retirement, disqualification or removal from office.
Section 23. Director Discretion. In determining what he or she reasonably believes to be in the best interests of the Corporation in the performance of his or her duties as a director, a Director may consider, to the extent permitted by law, both in the consideration of tender and exchange offers, mergers, consolidations and sales of all or substantially all of the Corporation's assets and otherwise, such factors as the Board of Directors determines to be relevant, including without limitation:
What constitutes a quorum? |
One third of the outstanding shares of Common Stock as of the Record Date. On the Record Date, there were 290,583,227 shares of Common Stock outstanding. A quorum must be present, in person or in part through orderly liquidation,by proxy, before any action can be taken at the premiums over market priceAnnual Meeting, except an action to adjourn the meeting.
How many votes are required for the approval of each item? |
What are Broker Non votes? |
If your shares are held in a brokerage account, your broker will ask you how you want your shares to be voted. If you give your broker directions, your shares will be voted as you direct. If you do not give directions, the broker may vote your shares on routine items of business, but not on non routine items. Proxies that are returned by brokers because they did not receive directions on how to vote on non routine items are called "broker non votes."
How do I vote by proxy? |
Shareholders of record may vote by mail, by telephone or through the Internet. Shareholders may vote "for," "against" or "abstain" from voting for each of the Director nominees, the advisory vote to approve named executive officer compensation, and the Corporation's financial condition and future prospects; and
How do I vote shares that are held by my broker? |
If you own shares held by a broker, you may direct your broker or other nominee to vote your shares by following the instructions that your broker provides to you. Most brokers offer voting by mail, telephone and societal considerations.
| 562016 Proxy Statement | | |
In connection
How do I vote in person? |
If you are going to attend the Annual Meeting, you may vote your shares in person. However, we encourage you to vote in advance of the meeting by mail, telephone or through the Internet even if you plan to attend the meeting.
How do I vote my shares held in the Company's 401(k) plan? |
The trustees of the plan will vote your shares in accordance with any such evaluation, the Boarddirections you provide by voting on the voting instruction card or the instructions in the email message that notified you of Directors is authorizedthe availability of the proxy materials. Shares for which voting instructions are not received are voted in the discretion of the trustees.
How are shares held in the Demutualization separate account voted? |
Principal became a public company on October 26, 2001, when Principal Mutual Holding Company converted from a mutual insurance holding company to conduct such investigationsa stock company (the "Demutualization") and the initial public offering of shares of the Company's Common Stock was completed. Principal issued Common Stock to engagePrincipal Life, and Principal Life allocated this Common Stock to a separate account that was established to fund policy credits received as Demutualization compensation by certain employee benefit plans that owned group annuity contracts. Although Principal Life will vote these shares, the plans may give Principal Life voting directions. A plan may give voting directions by following the instructions on the voting instruction card or the instructions in such legal proceedingsthe message that notified you of the availability of proxy materials. Principal Life will vote the shares as to which it received no direction in the same manner, proportionally, as the shares in the Demutualization separate account for which it has received directions.
Who counts the votes? |
Votes will be counted by Computershare Trust Company, N.A.
What happens if I do not vote on an issue when returning my proxy? |
If no specific instructions are given, proxies that are signed and returned will be voted as the Board of Directors may determine.recommends:
Section 34. Management of Business. The following provisions are inserted for the management of the business and for the conduct of the affairs of the Corporation and for the purpose of creating, defining, limiting and regulating the powers of the Corporation and its Directors and stockholders:
How do I revoke my proxy? |
If you hold your shares in 2016street name, you must follow the instructions of your broker or bank to revoke your voting instructions. Otherwise, you can revoke your proxy or voting instructions by voting a new proxy or instruction card or by voting at the meeting.
What should I do if I want to attend the Annual Meeting? |
Please bring photo identification and, later may be so removed withif your stock is held by a broker or without cause.
| | | 2016 Proxy Statement57 |
How do I contact the Board? |
Principal has a process for shareholders and all other interested parties to send communications to the Board through the Lead Director. You may contact the Lead Director of Directors resulting from death, resignation, retirement, disqualification, removal from officethe Board through the Investor Relations section of the Company's website at www.principal.com, or by writing to:
Lead Director, c/o Karen E. Shaff
Executive Vice President, General Counsel and Secretary
Principal Financial Group, Inc.
Des Moines, Iowa 50392-0300
All emails and letters received will be categorized and processed by the Company's Secretary and then sent to the Company's Lead Director.
How do I submit a shareholder proposal for the 2017 Annual Meeting? |
The Company's next annual meeting is scheduled for May 16, 2017. Proposals should be sent to the Company's Secretary. Proposals to be considered for inclusion in next year's proxy statement must be received by December 8, 2016. In addition, the Company's By-Laws provide that any shareholder wishing to propose any other causebusiness at the annual meeting must give Principal written notice between January 17, 2017 and newly created Directorships resulting from any increaseFebruary 21, 2017. That notice must provide other information as described in the authorized numberCompany's By-Laws, which are on the Company's website, www.principal.com.
What is "householding?" |
We send shareholders of Directors shall be filled inrecord at the manner provided in the By-Lawssame address one copy of the Corporation.
If you share the electionsame address as multiple shareholders and would like Principal to send only one copy of Directors shall be given infuture proxy materials, please contact Computershare Trust Company, N.A. at 866-781-1368, or P.O. Box 43078, Providence, RI 02940-3078. You can also contact Computershare to receive individual copies of all documents.
Where can I receive more information about the Company? |
We file reports and other information with the mannerSEC. This information is available on the Company's website at www.principal.com and toat the extent provided in the By-Laws of the Corporation.
The Board of Directors aturges you to exercise your right to vote by using the time when the election is held and need not be by written ballot.
| 582016 Proxy Statement | | |
Mclagan Investment Management Survey Participants
Towers Watson Diversified Insurance Study of Executive Compensation Participants Appendix A
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| Towers Watson 2015 Financial Services Executive Compensation Survey Participants | ||||
AAA Northern California, Nevada & Utah | | CSAA Insurance Group | ||
| ACE Limited | | Cullen Frost Bankers | ||
| AFLAC | | |||
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Ameritas Life | | Ernst & Young | ||
| Arthur J Gallagher & Company | | Eventide Asset Management, LLC | ||
| Aspen Specialty | | EverBank | ||
| Associated Banc-Corp | | Farm Credit Bank of Texas | ||
| Assurant | | Farmers Group | ||
| Athene | | Federal Home Loan Bank of Atlanta | ||
| Auto Club Group | | Federal Home Loan Bank of San Francisco | ||
| AXA Group | | Federal Reserve Bank of Atlanta | ||
| Bank of Montreal | | Federal Reserve Bank of Cleveland | ||
| Bank of the West | | Federal Reserve Bank of San Francisco | ||
| Barclays | | Federal Reserve Bank of St. Louis | ||
| BB&T | | Federal Reserve Board | ||
| BBVA | | Fidelity Investments (FMR) | ||
| BECU | | Fifth Third Bancorp | ||
| Behringer | | FINRA | ||
| Blue Cross Blue Shield of Arizona | | First Data | ||
| Blue Cross Blue Shield of Florida | | First Financial Bancorp | ||
| Blue Cross Blue Shield of Louisiana | | First Horizon National | ||
| Blue Shield of California | | First Interstate Bank | ||
| BOK Financial | | First Midwest Bancorp | ||
| Bremer Financial | | First National of Nebraska | ||
| Cadence Bank | | Franklin Resources | ||
| Capital One Financial | | Freddie Mac | ||
| Caterpillar Financial Services | | GATX | ||
| CBRE Global Investors | | GE Capital | ||
| Centene | | Genpact | ||
| Charles Schwab | | Genworth Financial | ||
| Chubb | | Gray Insurance Company | ||
| Cigna | | Great American Insurance | ||
| Citizens Property Insurance | | Great-West Financial | ||
| City National Bank | | Guardian Life | ||
| CLS | | Hartford Financial Services Group | ||
| CME Group | | Health Net | ||
| CNA Insurance | | Hitachi Capital America | ||
| CNO Financial | | Horizon Blue Cross Blue Shield of New Jersey | ||
| Comerica | | H&R Block | ||
| Commerce Bancshares | | HSBC Bank | ||
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Towers Watson Financial Services Executive Compensation Participants
| Humana | | Principal Financial Group | ||||
| | Progressive | |||||
| Iberia Bank | | Protective Life | ||||
| Indiana Farm Bureau Insurance | | Prudential Financial | ||||
| Inland Bancorp | | Radian Group | ||||
| Jackson National Life | | Realogy | ||||
| JJB Hilliard, WL Lyons, LLC | | Regions Financial | ||||
| John Hancock | | Reinsurance Group of America | ||||
| Johnson Financial Group | | RLI | ||||
| KeyCorp | | Rockland Trust Company | ||||
| Knights of Columbus | | Sallie Mae | ||||
| Liberty Mutual | | Santander Bank | ||||
| Lincoln Financial | | SBLI of Massachusetts | ||||
| Loews | | Securian Financial Group | ||||
| LPL Financial | | Society Insurance | ||||
| Manulife Financial | | Springleaf Financial Services | ||||
| MAPFRE USA | | StanCorp Financial Group | ||||
| Markel | | State Farm Insurance | ||||
| Marsh & McLennan | | State Street | ||||
| Massachusetts Mutual | | Sun Life Financial | ||||
| MB Financial | | SunTrust Banks | ||||
| McGraw-Hill Financial | | SVB Financial | ||||
| Mercedes-Benz Financial Services | | Synchrony Financial | ||||
| MetLife | | Synovus Financial Corporation | ||||
| Moody's | | TD Ameritrade | ||||
| M&T Bank | | TD Bank Financial Group | ||||
| Munich Re Group | | Thrivent Financial for Lutherans | ||||
| Mutual of Omaha | | TIAA-CREF | ||||
| Nasdaq | | TigerRisk Partners | ||||
| Nationwide | | Tinker Federal Credit | ||||
| Navy Federal Credit Union | | Transamerica | ||||
| NCCI Holdings | | Travelers | ||||
| NC State Employees' Credit Union | | United Federal Credit Union | ||||
| New York Life | | Universal Insurance North America | ||||
| Northwestern Mutual | ||||||
Ohio National Financial Services | | Unum | ||||
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Penn Mutual Life | | Webster Bank | ||||
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Plymouth Rock Assurance | | World Bank | ||||
Portfolio Recovery Associates | | Zurich North America | ||||
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| A-22016 Proxy Statement | | |
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| Towers Watson 2015 Diversified Insurance Compensation Survey Participants | ||
AFLAC | | Northwestern Mutual |
| AIG | | OneAmerica Financial Partners |
| Allstate | | Pacific Life |
| AXA Group | | Phoenix Companies |
| Cigna | | Principal Financial Group |
| CNO Financial | | Prudential Financial |
| Genworth Financial | | Securian Financial Group |
| Guardian Life | | Sun Life Financial |
| Hartford Financial Services Group | | Thrivent Financial for Lutherans |
| John Hancock | | TIAA-CREF |
| Lincoln Financial | | Transamerica |
| Massachusetts Mutual | | Unum Group |
| MetLife | | USAA |
| Nationwide | | Voya Financial Services |
| New York Life | | |
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| McLagan | ||||||
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| | Diamond Hill Investment Group Inc. | |||||
| Adams Funds | | Dimensional Fund Advisors Inc. | ||||
| Advisory Research, Inc. (Piper Jaffray) | | Driehaus Capital Management LLC | ||||
| AEW Capital Management | | DuPont Capital Management | ||||
| Allianz Global Investors | | Duff & Phelps Investment Management Co. | ||||
| Alpine Woods Capital Investors, LLC | | Eaton Vance Management | ||||
| American Beacon Advisors | | Epoch Investment Partners, Inc. | ||||
| American Century Investments | | F-Squared Investments | ||||
| AMG Funds LLC | | Federated Investors, Inc. | ||||
| AMP Capital Investors Limited | | Fidelity Investments | ||||
| Amundi Smith Breeden LLC | | Fiera Capital Corporation | ||||
| Analytic Investors, LLC | | First Quadrant, L.P. | ||||
| AQR Capital Management, LLC | | First Eagle Investment Management, LLC | ||||
| Arrowstreet Capital, L.P. | | Franklin Templeton Investments | ||||
| Artisan Partners Limited Partnership | | Fred Alger & Company, Incorporated | ||||
| Ashmore Equities Investment Management (US) LLC | | Fund Evaluation Group, LLC | ||||
| AXA Investment Managers | | GE Asset Management | ||||
| Babson Capital Management LLC | | Geode Capital Management, LLC | ||||
| Baring Asset Management, Inc. | | Glenmede Trust Company | ||||
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BNY Mellon Cash Investment Strategies | | Harris Associates | ||||
| Boston Company Asset Management, LLC, The | | Heartland Advisors, Inc. | ||||
| Brandes Investment Partners, L.P. | | Heitman | ||||
| Brandywine Global Investment Management, LLC | | Henderson Global Investors | ||||
| Bridgewater Associates, Inc. | | Hennessy Advisors, Inc. | ||||
| Bridgeway Capital Management, Inc. | | Institutional Capital LLC (ICAP) | ||||
| Brown Advisory | | INTECH | ||||
| Brown Brothers Harriman & Co. | | Intermediate Capital Group | ||||
| | | 2016 Proxy StatementA-3 |
| Calamos Investments | | Invesco Plc | ||
| Capital Group | | Investment Counselors of Maryland, LLC | ||
| Causeway Capital Management LLC | | Jacobs Levy Equity Management, Inc. | ||
| CBRE Global Investors | | Janus Capital Group | ||
| Charles Schwab Investment Management, Inc. | | Jennison Associates, LLC | ||
| ClearBridge Investments | | Jensen Investment Management, Inc. | ||
| Cohen & Steers, Inc. | | JPMorgan Global Investment Management | ||
| Columbia Threadneedle Investments | | Kayne Anderson Rudnick Investment Management, LLC | ||
| CommonFund | | Lazard Asset Management LLC | ||
| Conning Holdings Corp. | | Logan Circle Partners, L.P. | ||
| Copper Rock Capital Partners, LLC | | Loomis, Sayles & Company, L.P. | ||
| Cornerstone Capital Management | | Lord, Abbett & Co., LLC | ||
| Cornerstone Investment Partners, LLC | | Luther King Capital Management | ||
| Delaware Investments | | MacKay Shields LLC | ||
| Matthews International Capital Management | | Vaughan Nelson Investment Management, L.P. | ||
| McDonnell Investment Management, LLC | | Virtus Investment Partners, Inc. | ||
| Mellon Capital Management | | Vontobel Asset Management, Inc. | ||
| Mercer Global Investments | | Waddell & Reed Investment Management Co. | ||
| MFS Investment Management | | Wellington Management Company, LLP | ||
| Morgan Stanley Investment Management | | Western Asset Management Company | ||
| Neuberger Berman Group | | Westwood Holdings Group, Inc. | ||
| Newfleet Asset Management, LLC | | Why Investment Management, Inc. | ||
| Nikko Asset Management Americas, Inc | | William Blair & Company, L.L.C. | ||
| Numerifc Investors LLC | | Wisdom Tree Investments, Inc. | ||
| Nuveen Investments | | |||
| NWQ Investment Management Company, LLC | | |||
| Oaktree Capital Management, LLC | | |||
| Oppenheimer Funds | | |||
| Orbis Investment Management Limited | | |||
| O'Shaughnessy Asset Management, LLC | | |||
| Pacific Investment Management Company LLC | | |||
| PanAgora Asset Management, Inc. | | |||
| PineBridge Investments | | |||
| Pioneer Investment Management | | |||
| Principal Global Investors | | |||
| ProShare Advisors LLC | | |||
| Putnam Investments | | |||
| Pyramis Global Advisors | | |||
| Pzena Investment Management LLC | | |||
| Rafferty Asset Management LLC (Direxion) | | |||
| Raymond James Financial Services, Inc. | | |||
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Vanguard Group, Inc., The | |
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EE-9039-11 Non-GAAP Financial Measures
Operating earnings versus U.S. GAAP (GAAP) net income available to common stockholders
Management uses operating earnings, which excludes the effect of net realized capital gains and losses, as adjusted, and other after-tax adjustments the company believes are not indicative of overall operating trends, for goal setting, as a basis for determining employee compensation, and evaluating performance on a basis comparable to that used by investors and securities analysts. Note: it is possible these adjusting items have occurred in the past and could recur in future reporting periods. While these items may be significant components in understanding and assessing our consolidated financial performance, management believes the presentation of operating earnings enhances the understanding of results of operations by highlighting earnings attributable to the normal, ongoing operations of the company's businesses.
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| | | Years Ended Dec. 31, | | |||||||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
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| (In millions, except as noted) | | 2015 | | 2014 | | 2013 | | 2012 | | 2011 | | |||||
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Net income available to common stockholders per diluted share | | | | | | | ||||||||||
Operating earnings per diluted share | | $ | 4.26 | | $ | 4.41 | | $ | 3.55 | | $ | 2.69 | | $ | 2.61 | |
Net realized capital gains (losses) | | (0.44 | ) | (0.34 | ) | (0.60 | ) | 0.14 | | (0.44 | ) | |||||
Other after-tax adjustments | | 0.24 | | (0.36 | ) | — | | (0.25 | ) | (0.26 | ) | |||||
Adjustment for redeemable noncontrolling interest | | — | | (0.06 | ) | — | | — | | — | | |||||
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Net income available to common stockholders per diluted share | | $ | 4.06 | | $ | 3.65 | | $ | 2.95 | | $ | 2.58 | | $ | 1.91 | |
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Net income available to common stockholders | | | | | | | ||||||||||
Operating earnings | | $ | 1,270.5 | | $ | 1,317.9 | | $ | 1,059.9 | | $ | 808.8 | | $ | 829.3 | |
Net realized capital gains (losses) | | (133.8 | ) | (100.5 | ) | (179.1 | ) | 39.0 | | (141.7 | ) | |||||
Other after-tax adjustments | | 72.6 | | (106.3 | ) | (1.1 | ) | (74.2 | ) | (82.3 | ) | |||||
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Net income available to common stockholders | | $ | 1,209.3 | | $ | 1,111.1 | | $ | 879.7 | | $ | 773.6 | | $ | 605.3 | |
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Net income ROE available to common stockholders (including AOCI) | | | | | | | ||||||||||
Operating earnings ROE (x-AOCI, other than foreign currency translation adjustment) | | 14.2 | % | 15.1 | % | 12.5 | % | 9.8 | % | 10.2 | % | |||||
Net realized capital gains (losses) | | (1.5 | )% | (1.2 | )% | (2.1 | )% | 0.5 | % | (1.8 | )% | |||||
Other after-tax adjustments | | 0.8 | % | (1.2 | )% | 0.0 | % | (0.9 | )% | (1.0 | )% | |||||
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Net income ROE available to common stockholders (x-AOCI, other than for currency translation adjustment) | | 13.5 | % | 12.7 | % | 10.4 | % | 9.4 | % | 7.4 | % | |||||
Net unrealized capital gains (losses) | | (1.3 | )% | (1.2 | )% | (1.2 | )% | (1.0 | )% | (0.5 | )% | |||||
Net unrecognized postretirement benefit obligation | | 0.6 | % | 0.3 | % | 0.4 | % | 0.4 | % | 0.2 | % | |||||
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Net income ROE available to common stockholders (including AOCI) | | 12.8 | % | 11.8 | % | 9.6 | % | 8.8 | % | 7.1 | % | |||||
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| | | 2016 Proxy StatementB-1 |
EE-9039-14
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IMPORTANT ANNUAL MEETING INFORMATION 000004 ENDORSEMENT LINE SACKPACK MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 C 1234567890 Annual Meeting Notice 1234 5678 9012 345 Important Notice Regarding the Availability of Proxy Materials for the Principal Financial Group, Inc. Annual Meeting to be Held on Tuesday, May 17, 2016 Under Securities and Exchange Commission rules, you are receiving this notice that the proxy materials for the annual meeting are available on the Internet. Follow the instructions below to view the materials and vote online or request a copy. The items to be voted on and location of the annual meeting are on the reverse side. Your vote is important! If you want to receive a paper copy or an e-mail of these materials, you must request one. There is no charge to you for this request. Please make your request as instructed on the reverse side on or before May 6, 2016 to facilitate timely delivery. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. We encourage you to access and review all of the important information contained in the proxy materials before voting. The proxy statement and annual report are available at: www.investorvote.com Easy Online Access — A Convenient Way to View Proxy Materials and Vote Step 1: Go to www.investorvote.com. Step 2: Follow the instructions on the screen to log in. Step 3: Click on the icon on the right to view the current meeting materials. Step 4: Return to the investorvote.com window and make your selection as instructed on each screen to select delivery preferences and vote. When you go online, you can also help the environment by consenting to receive electronic delivery of future materials. 001CSP00B7 02B0UB P F G
Annual Meeting Notice Principal Financial Group, Inc.’s Annual Meeting will be held on May 17, 2016 at 750 Park Street, Des Moines, Iowa, at 9:00 a.m. Central Daylight Time. The Board of Directors recommends a vote FOR proposals 1, 2 and 3: 1. Election of Directors 2. Advisory vote to approve executive compensation 3. Ratification of independent auditors PLEASE NOTE: YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must go to www.investorvote.com, or you can request a set of proxy materials by following the instructions at the bottom of this page. If you wish to attend the Annual Meeting, please bring proof of share ownership and photo identification with you. Directions to the Principal Financial Group, Inc. 2016 Annual Meeting 2016 Annual Meeting of Principal Financial Group, Inc. Shareholders Tuesday, May 17, 2016, 9:00 a.m. Central Daylight Time 750 Park Street, Des Moines, Iowa Upon arrival, please present proof of share ownership and photo identification at the registration desk. You do not need to attend the Annual Meeting to vote. Here’s how to order a copy of the proxy materials and select a future delivery preference: Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or e-mail options below. E-mail copies: Current and future e-mail delivery requests must be submitted via the Internet following the instructions below. If you request an e-mail copy of current materials you will receive an e-mail with a link to the materials. P LEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials. Telephone — Call us free of charge at 1-866-641-4276 in the USA, US territories & Canada using a touch-tone phone. Internet — Go to www.investorvote.com. E-mail — Send an e-mail to investorvote@computershare.com with “Proxy Materials PFG” in the subject line. Include in the message your full name and address, plus the number located in the shaded bar on the reverse, and state in the e-mail that you want a paper copy of current meeting materials. You can also state your preference to receive a paper copy for future meetings. To facilitate timely delivery, all requests for a paper copy of the proxy materials must be received by May 6, 2016. 02B0UB |
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MMMMMMMMMMMM . 2016 Annual Meeting Proxy Card MMMMMMMMMMMMMMM C123456789 000004 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your card, you may choose one of the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Daylight Time, on May 17, 2016. MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Vote by Internet • Log on to the Internet and go to www.investorvote.com • Follow the steps outlined on the secured website. Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Annual Meeting Proxy Card 1234 5678 9012 345 q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Election of Directors Proposals 1. The Board of Directors recommends a vote FOR the listed nominees. The Board of Directors recommends a vote FOR Proposals 2 and 3. ForAgainst Abstain + For Against Abstain 2. Advisory vote to approve executive compensation 3. Ratification of independent auditors 01 - Michael T. Dan 02 - C. Daniel Gelatt 03 - Sandra L. Helton 04 – Blair C. Pickerell Change of Address Change of Address — Please print new address below. Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. MMMMMMMC 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 1 U P X2 7 0 0 4 1 1 <STOCK#> 02B0SB MMMMMMMMM D C B A X IMPORTANT ANNUAL MEETING INFORMATION
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. 2016 Annual Meeting 2016 Annual Meeting of Principal Financial Group, Inc. Shareholders Tuesday, May 17, 2016, 9:00 a.m. Central Daylight Time 750 Park Street, Des Moines, Iowa Upon arrival, please show proof of share ownership and photo identification at the registration desk. You do not need to attend the Annual Meeting to vote. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — Principal Financial Group, Inc. This proxy is solicited on behalf of the Board of Directors of Principal Financial Group, Inc. for the annual meeting of shareholders to be held at 9:00 a.m. Central Daylight Time, May 17, 2016, at 750 Park Street. The shareholder signator(s) on this form hereby appoints Timothy M. Dunbar, Terrance J. Lillis and Karen E. Shaff, and each of them, proxies with full power of substitution, to vote all shares of Principal Financial Group, Inc. common stock held in the name of the shareholder(s) at the 2016 annual meeting of shareholders and at any adjournment thereof, upon all subjects that may properly come before the meeting, including the matters described in the Proxy Statement, subject to any directions indicated on the reverse side. If no directions are given, the proxies will vote for the election of all listed nominees and in accordance with the Board of Directors recommendations on the other matters listed on the reverse side, and at their discretion, on any other matter that may properly come before the meeting. This proxy will be voted as directed, or if no direction is indicated, will be voted in accordance with the Board of Directors recommendations. SEE REVERSE SIDE FOR IMPORTANT INFORMATION ABOUT VOTING BY INTERNET OR TELEPHONE.
MMMMMMMMMMMM . MMMMMMMMMMMMMMM C123456789 000004 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your card, you may choose one of the voting methods outlined below. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Votes submitted by the Internet or telephone must be received by 1:00 a.m., Central Daylight Time, on May 13, 2016. MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Vote by Internet • Log on to the Internet and go to www.investorvote.com • Follow the steps outlined on the secured website. Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Annual Meeting Voting Instruction Card 1234 5678 9012 345 q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Election of Directors Proposals 1. The Board of Directors recommends a vote FOR the listed nominees. The Board of Directors recommends a vote FOR Proposals 2 and 3. ForAgainst Abstain + For Against Abstain 2. Advisory vote to approve executive compensation 3. Ratification of independent auditors 01 - Michael T. Dan 02 - C. Daniel Gelatt 03 - Sandra L. Helton 04 – Blair C. Pickerell Change of Address Change of Address — Please print new address below. Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. MMMMMMMC 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 1 U P X2 7 0 0 4 1 3 <STOCK#> 02B0VB MMMMMMMMM D C B A X IMPORTANT ANNUAL MEETING INFORMATION
. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Voting Instruction Card — Principal Financial Group, Inc. By signing this voting instruction card, you hereby authorize Bankers Trust Company, NA of Des Moines, Iowa, the Trustee for The Principal Select Savings Plan for Employees and The Principal Select Savings Plan for Individual Field (“401(k)”), as holder of plan assets invested in Principal Financial Group, Inc. common stock, to vote in person or by proxy all shares credited to your account as of March 22, 2016, the record date, at the 2016 annual meeting of shareholders to be held on May 17, 2016 or at any adjournment or postponement thereof. Indicate how the underlying Principal Financial Group, Inc. shares allocated to your plan account are to be voted by the trustee by marking the boxes on the reverse side. If you sign the voting instruction card but give no directions, the trustee will vote your shares for the election of all listed nominees and in accordance with the Board of Directors recommendations on the other matters listed on the reverse side. If you do not complete the voting instruction card, the trustee will vote your shares as the trustee determines in its discretion. SEE REVERSE SIDE FOR IMPORTANT INFORMATION ABOUT VOTING BY INTERNET OR TELEPHONE.
MMMMMMMMMMMM . MMMMMMMMMMMMMMM C123456789 000004 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext 000000000.000000 ext ENDORSEMENT_LINE______________ SACKPACK_____________ Electronic Voting Instructions Available 24 hours a day, 7 days a week! Instead of mailing your card, you may choose one of the voting methods outlined below. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR. Votes submitted by the Internet or telephone must be received by 1:00 a.m., Central Daylight Time, on May 13, 2016. MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Vote by Internet • Log on to the Internet and go to www.investorvote.com • Follow the steps outlined on the secured website. Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Annual Meeting Voting Instruction Card 1234 5678 9012 345 q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Election of Directors Proposals 1. The Board of Directors recommends a vote FOR the listed nominees. The Board of Directors recommends a vote FOR Proposals 2 and 3. ForAgainst Abstain + For Against Abstain 2. Advisory vote to approve executive compensation 3. Ratification of independent auditors 01 - Michael T. Dan 02 - C. Daniel Gelatt 03 - Sandra L. Helton 04 – Blair C. Pickerell Change of Address Change of Address — Please print new address below. Authorized Signatures — This section must be completed for your vote to be counted. — Date and Sign Below Please sign exactly as name(s) appears hereon. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian, please give full title. Date (mm/dd/yyyy) — Please print date below. Signature 1 — Please keep signature within the box. Signature 2 — Please keep signature within the box. MMMMMMMC 1234567890 J N T MR A SAMPLE (THIS AREA IS SET UP TO ACCOMMODATE 140 CHARACTERS) MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND MR A SAMPLE AND + 1 U P X2 7 0 0 4 1 4 <STOCK#> 02B0WB MMMMMMMMM D C B A X IMPORTANT ANNUAL MEETING INFORMATION
. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Voting Instruction Card — Principal Financial Group, Inc. By signing this voting instruction card, you hereby authorize Northern Trust Investments, Inc., Portfolio Manager of The Principal Financial Group, Inc. Stock Separate Account, to vote as agent for Principal Life Insurance Company, in person or by proxy, all shares attributable to units credited to your plan account as of March 22, 2016, the record date, at the 2016 annual meeting of shareholders to be held on May 17, 2016 or at any adjournment or postponement thereof. Indicate how your interests are to be voted by the Portfolio Manager by marking the boxes on the reverse side. If you sign the voting instruction card but give no directions, Northern Trust will vote your interests in accordance with the Board of Directors recommendations. If you do not complete the voting instruction card, Northern Trust will vote your interests in the same proportion as the shares held in the Separate Account as to which Northern Trust has received voting instructions. SEE REVERSE SIDE FOR IMPORTANT INFORMATION ABOUT VOTING BY INTERNET OR TELEPHONE.
