Use these links to rapidly review the documentTABLE OF CONTENTSTable of ContentsEXECUTIVE COMPENSATIONExecutive 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. )
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o | | Preliminary Proxy Statement |
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ý | | Definitive Proxy Statement |
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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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April 7, 2014Notice 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 20, 2014,17, 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:
| is now | |
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 2013, 1,3812015, 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
Meeting Date: | | |
Time: | | |
Location: | |
PRINCIPAL FINANCIAL GROUP, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
May 20, 2014
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 20, 2014,17, 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 26, 2014, 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 26, 2014.22, 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.
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 One—Election of Directors | | 6 |
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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 | | |
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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 Plan Based Awards for Fiscal Year End December 31, | |
22016 Proxy Statement | | |
Outstanding Equity Awards at Fiscal Year End December 31, | | ||
Option Exercises and Stock Vesting | | ||
Pension Plan Information | | ||
Pension Distributions | | 43 | |
Pension Benefits | | ||
Non Qualified Deferred Compensation | | ||
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 Meeting | | ||
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Appendix | | ||
Appendix B Non GAAP Financial Measures | | B-1 |
| | 2016 Proxy Statement3 |
PROXY STATEMENT
PRINCIPAL FINANCIAL GROUP, INC.711 HIGH STREETDES MOINES, IOWA 50392-0100
QUESTIONS AND ANSWERS ABOUT THE ANNUAL MEETING
Director Qualifications, Director Tenure, Process for Identifying and Evaluating Director Candidates and Diversity of the Board
Why didn't I receive a copyThe 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 paper proxy materials?
current Board makeup and the Company's strategic initiatives, risk factors, and other relevant circumstances, such as a candidate's current employment responsibilities. The SecuritiesCommittee also assesses personal and Exchange Commission ("SEC") rules allow companiesprofessional ethics, integrity, values and ability to delivercontribute to the Board. The Board values experience as a noticecurrent 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 Internet availabilitycurrent 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 proxy materials to shareholders and provide Internet access to those proxy materials. Shareholders may obtain paper copiescurrent Directors for nomination. The Committee reviews the performance of Directors whose terms are expiring as part of the proxy materials freedetermination of charge by followingwhether to recommend their nomination for reelection to the instructions provided inBoard. Input is also received from the notice of Internet availability of proxy materials.
Why did I receive notice ofother Directors and accessan outside consultant may be engaged to this proxy statement?
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 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 20, 2014, 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 7, 2014.
What isannually conducts 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 2014 Annual Meeting; Terrance J. Lillis, Executive Vice President and Chief Financial Officer; and Karen E. Shaff, Executive Vice President, General Counsel and Secretary and Ralph C. Eucher, Executive Vice President.
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 26, 2014 ("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 294,953,410 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 approval of the Directors Stock Plan and Stock Incentive Plan, the advisory vote to approve named executive officer compensation,self-evaluation regarding its effectiveness, and the proposal to ratify the appointment of the independent auditors.
voting for proxy cards will be available until 1:00 a.m., Central Daylight Time, on May 20 2014, and until 1:00 a.m., Central Daylight Time, on May 16, 2014, for voting instruction cards.
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 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 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 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 recommends:
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 26, 2014. 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 Lead Director. You may contact the Lead Director of the Board through the Investor Relations section of the Company's website atwww.principal.com, or by writing to:
Lead Director, c/o Karen E. Shaff,Executive Vice President, General Counsel and SecretaryPrincipal 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 2015 Annual Meeting?
The Company's next annual meeting is scheduled for May 19, 2015. 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, 2014. 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 20, 2015 and February 21, 2015. 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,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
42016 Proxy Statement | | |
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 Guidelines,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 Corporate Code of Business Conductfull Board. This process, and Ethics are also available onpast engagement efforts, regularly supplement relevant communications regarding corporate governance made through the Company's websitewww.principal.com. and by the Investor Relations staff.
The Board urges youNominating and Governance Committee will consider shareholder recommendations for Director candidates sent to exercise your right to voteit c/o the Company Secretary. Director candidates nominated by usingshareholders are evaluated in the Internet or telephone orsame manner as Director candidates identified by returning the proxy or voting instruction card.Committee and search firms it retains.
| | 2016 Proxy Statement5 |
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 IIII Directors With Terms Expiring in 2017
2019
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Michael T. Dan | | Committees: Human Resources (Chair), Nominating and Governance (since May 18, 2015) Former Public Directorships/Past 5 Years: The Brink's Company 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 1999-2011. The Brink's Company had 70,000 employees worldwide, operations in over 100 countries and $3.8 billion in revenue in 2011. Prior to joining Brink's, Mr. Dan served as President of Armored Vehicle Builder, Inc. SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of Brink's, Mr. Dan has executive level experience in international operations, risk management, strategic planning, brand management, executive compensation, customer service, marketing and mergers and acquisitions. 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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C. Daniel Gelatt | | 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 analog and digital imaging services to clients worldwide for more than 40 years. He was an Assistant Professor in the Physics Department at Harvard University, where he earned his Ph.D., and was a research manager at the IBM T.J. Watson Research Center before joining the Gelatt companies in 1982. He is a director of Advanced Marketing Concepts, Ltd., TPI Holdings, Inc., nPoint Inc., The Gelatt Corporation, Ginkgo LLC, MNT Corporation and Elmwood Corporation. SKILLS AND QUALIFICATIONS: In addition to leading and having financial responsibility for NMT and other Gelatt privately owned companies, Dr. Gelatt has an extensive background in software and nonlinear optimization and executive level experience in product development, marketing and strategic planning. 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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62016 Proxy Statement | | |
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Sandra L. Helton | | 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 Officer—Telephone and Data Systems, Inc. ("TDS"), a diversified telecommunications organization that includes United States Cellular Corporation, from 1998 through 2006. As of December 31, 2006, TDS served 7 million customers/units in 36 states with annual revenues of $4.5 billion. In her role, Ms. Helton had responsibility for the Finance, Information Technology, and other corporate functions. Prior to joining TDS, Ms. Helton spent 26 years with Corning Incorporated, where she held engineering, strategy and finance positions, including Senior Vice President and Treasurer from 1991-1997. She also served as Vice President and Corporate Controller of Compaq Computer Corporation from 1997-1998. SKILLS AND QUALIFICATIONS: Ms. Helton has global executive level experience in corporate strategy, finance, accounting and control, treasury, investments, information technology and other corporate administrative functions, as well as extensive corporate governance experience. 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: Finance, Nominating and Governance (each since August 17, 2015) and Strategic Issues (since September 23, 2015) Public Directorships/Past 5 Years: Dah Sing Financial Holdings (limited) (current). Mr. Pickerell served as Chairman, Asia, Nikko Asset Management from 2010-July 2015. From 2007-2010, he was CEO, Asia, at Morgan Stanley Investment Management. He has also served as Chief Executive, Asia Pacific, of HSBC Asset Management and as Chairman of Jardine Fleming Funds. 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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| | 2016 Proxy Statement7 |
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 the President and Chief Operating Officer of Discover Financial Services since 2004. He served as the Chief Administrative Officer, Executive Vice President and Chief Strategy Officer of Morgan Stanley from 2001 to 2004. He served as Chief Marketing Officer of Discover Financial Services from 1998 to 2001. He served as a Senior Executive Vice President of MBNA America Bank from 1994 to 1998. He has been a Director of Student Loan Corporation since December 31, 2010. 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 August 18, 2015. He served as President and Chief Operating Officer from November 25, 2014-August 17, 2015. He joined Principal Life in 1984, and was President—Retirement, Insurance and Financial Services ("RIS") from 2009-2014, President, RIS from 2008-2009 and Executive Vice President, RIS from 2006-2008. He is a member of the boards of directors of the American Council of Life Insurers, the Financial Services Roundtable, Business Roundtable, Iowa Business Council, Greater Des Moines Partnership, Employee Benefits Research Institute, Iowa State University Business School Dean's Advisory Council, United Way of Central Iowa and Partnership for a Healthier America. 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 has extensive operational experience, as well as expertise in risk management, executive compensation, marketing and sales, and mergers and acquisitions. Mr. Houston received a bachelor's of science degree from Iowa State University in 1984. |
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82016 Proxy Statement | | |
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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 With Terms Expiring in 2017
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Betsy J. Bernard | | 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 small business division as Executive Vice SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of AT&T, Ms. Bernard has executive level experience in brand management, marketing to individuals and small businesses, sales, customer care, operations, product management, electronic commerce, executive compensation, strategic planning, technology and mergers and acquisitions. 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, which SKILLS AND QUALIFICATIONS: In addition to her marketing leadership background, Ms. Carter-Miller has executive level experience in brand management, advertising, sales, multinational companies, international operations, mergers and acquisitions, product development, project management, strategic planning, technology and leadership development and training. She is also a certified public accountant. 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 executive level experience in asset management, investment portfolio management, financial services, international operations, product development, marketing and distribution, strategic planning, executive compensation, risk management and mergers and acquisitions. 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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Continuing Class III Directors With Terms Expiring in 2016
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The Board of Directors recommends that shareholders vote "For" all of the nominees for election at the Annual Meeting.
CORPORATE GOVERNANCE
Corporate Governance
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, and provides advice and counsel to, 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.regularly review best practices for corporate governance and modify our policies and practices as warranted. Our current best practices include:
Board Leadership Structure
The Board currently hasbelieves it should have the flexibility to establish a combined positionleadership structure that works best for Principal at any given time and reviews that structure as appropriate. Historically, the positions 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 is the Chairman 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 Elizabeth E. Tallett. Betsy J. Bernardbecause it is important that the Alternate Lead Director. The Lead Director is selected by 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 Lead Director and Alternate Lead 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 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 Lead 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 Lead Director seeks input from the other independent Directors. The Lead 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 Lead 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, pricing, operational and other business 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:
The Finance Committee:
The Human Resources Committee:
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 formally 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 open sessions of the Board, Audit and Finance Committee meetings and meets in Executive Session with the Audit Committee with other members of management.
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, includingour risk profile and risk management activities. Discussions include reviews of ongoing adherence to policy, impacts of external events, and how strategy, operational initiatives, and investment portfoliosoperations 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.
Embedding these regular inputs (Board composition, committee responsibilities, and management focus, reporting and accountability) into its oversight responsibilities reflectsprotocols to manage the full Board's commitment to the importance of risk management.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
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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 2014,2016, based on:
The Board affirmatively determined that the following Directors 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 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 other company'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 2013,2015, 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 $42,828by plan participants); $1,250 for third party administration services related to its group welfare benefit plans and approximately $1,750deferred compensation plan services; $757,246.30 for wellness services during 2013. Nippon Life and NLICA also paidinvestment services;. Principal Global Investors LLC ("PGI") and its subsidiaries approximately $968,530(Japan) Ltd. paid Nippon Life $2,607.00 for investment services in 2013, and paid Principal Life approximately $226,293 for service related to its retirement plans in 2013.401(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 20132015 of $51,625,000$62,700,000 during Nippon Life's $2 billion public issuance in October of 2012.
During a portion Since May 1, 2013, NLI US Investments, Inc. ("NLI"), has owned 20% of 2013, certain affiliatesPost Advisory Group, LLC ("Post"), an affiliate of the BankCompany. During 2015, Post paid NLI an aggregate of New York Mellon held$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 a registered investment company managed by PMC. As of the end of 2015 Wellington owned approximately 6.5% of the Company's Common Stock.
As of December 31, 2015, the Vanguard Group, Inc. managed funds holding in the aggregate more than 5%8.3% of the Company's Common Stock. During 2013, affiliates2015 Principal Shareholder Services, Inc. paid Vanguard $88,427.27 for sub-transfer agent services. Vanguard paid $1,059,786 in rent for lease of space to a borrower of the Company, primarily Principal Life and PGI, paid the Bank of New York Mellon and certain of its affiliates approximately $1,274,735 in fees for services furnished in the ordinary course, primarily for administrative and trustee services.
On May 1, 2013, a subsidiary of theInsurance Company Principal Global Investors, LLC ("PGI"), sold a 20 percent stake in Post Advisory Group, LLC ("Post") to Nippon Life and one of its affiliates for approximately $38 million. PGI acquired Post in 2003 and retains an 80 percent ownership in the business. Post is an investment manager of high yield fixed income securities. The transaction is expected to enhance Nippon Life's fixed income investmentgeneral account.
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management offerings to its clients and bring new distribution opportunities for Post. Post's management will continue to direct its day-to-day operations, with continued autonomy of investment decisions.
The Nominating and Governance Committee or its Chair of the Committee must approve or ratify all transactions with Related Parties that are not preapproved under the Company's Related Party Transaction Policy. At each quarterly meeting, the Committee reviews a report of any nonmaterial 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 10 meetings in 2013,2015, 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 on the Board attended the 20132015 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 | ||||||||||
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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 preapproving compensation of the independent auditor for non audit engagements, consistent with the Company's Auditor Independence Policy; • 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 | | Gary E. Costley(9) Dennis H. Ferro C. Daniel Gelatt Sandra L. Helton* Roger C. Hochschild(1) | |
9 | ||||||||||||||||
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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. C. Daniel Gelatt Roger C. Hochschild(1) Elizabeth E. Tallett | | 6 | |||||||||||||
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Nominating and Governance | | • Recommends • Reviews and reports to the Board on Director independence, performance of individual Directors, process for the annual self evaluations of the Board and its • Reviews environmental and corporate social responsibility matters | | Betsy J. Bernard* Jocelyn Carter-Miller Michael T. Dan(1) Blair C. Pickerell(3) Elizabeth E. Tallett | | 5 | ||||||||||
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Committee | | Responsibilities | | Members (*Committee Chair) | | Meetings Held in 2015 | ||||||||||
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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 | |||||||||||||
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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 | ||||||||||
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Executive | | | Betsy J. Bernard Sandra L. Helton Daniel J. Houston(4) Elizabeth E. Tallett Larry D. Zimpleman(9)* | | None | |||||||||||
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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.
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Annual Cash Retainers(1) | | |
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- Board | | $95,000 |
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- Audit Committee Chair | | $20,000 |
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- Human Resources Committee Chair | | $17,500 |
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- Finance Committee Chair | | $15,000 |
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- Nominating & Governance Committee Chair | | $15,000 |
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- Other Committee Chairs | | $5,000 |
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- Lead Director | | $25,000 |
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Annual Restricted Stock Unit Retainer(2) | | |
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- Board | | $130,000 |
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Meeting Attendance Fees | | |
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- Regularly Scheduled Board Meeting | | No meeting fees |
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- Non-regularly Scheduled Board Meetings (in person) | | $2,500 per day |
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- Non-regularly Scheduled Board Meetings (Telephonic) | | $1,000 |
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- Committee Meeting | | $1,500 |
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- Telephonic Committee Meeting | | $1,000 |
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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
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Name | | Fees Earned or Paid in Cash | | Stock Awards(1) | | Total | | |||||
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Betsy J. Bernard | | | $ | 132,000 | | | $ | 129,990 | | $ | 261,990 | |
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Jocelyn Carter-Miller | | | $ | 133,000 | | | $ | 129,990 | | $ | 262,990 | |
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Gary E. Costley | | | $ | 119,000 | | | $ | 129,990 | | $ | 248,990 | |
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Michael T. Dan | | | $ | 130,000 | | | $ | 129,990 | | $ | 259,990 | |
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Dennis H. Ferro | | | $ | 127,500 | | | $ | 129,990 | | $ | 257,490 | |
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C. Daniel Gelatt Jr. | | | $ | 123,500 | | | $ | 129,990 | | $ | 253,490 | |
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Sandra L. Helton | | | $ | 142,000 | | | $ | 129,990 | | $ | 271,990 | |
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Roger C. Hochschild | | | $ | 126,943 | | | $ | 145,143 | | $ | 272,086 | |
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Richard L. Keyser | | | $ | 6,000 | | | $ | 0 | | $ | 6,000 | |
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Luca Maestri | | | $ | 6,000 | | | $ | 0 | | $ | 6,000 | |
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Blair C. Pickerell | | | $ | 83,189 | | | $ | 97,866 | | $ | 181,055 | |
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Elizabeth E. Tallett | | | $ | 139,000 | | | $ | 129,990 | | $ | 268,990 | |
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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:
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Director Name | | Total RSUs Outstanding Fiscal Year End 2015 (Shares) |
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Betsy J. Bernard | | 34,373 |
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Jocelyn Carter-Miller | | 36,345 |
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Gary E. Costley | | 34,373 |
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Michael T. Dan | | 31,913 |
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Dennis H. Ferro | | 19,397 |
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C. Daniel Gelatt | | 39,139 |
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Sandra L. Helton | | 34,373 |
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Roger C. Hochschild | | 2,839 |
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Richard L. Keyser | | 0 |
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Luca Maestri | | 0 |
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Blair C. Pickerell | | 1,725 |
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Elizabeth E. Tallett | | 38,651 |
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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, 2013,2015, 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,
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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, 2013,2015, 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, 2014.2016.
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
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Director Qualifications, Process for Identifying and Evaluating Director Candidates and Diversity of the Board
The Nominating and Governance Committee regularly assesses the appropriate mix of skills and characteristics of Directors in light of the current makeup of the Board and the Company's needs. The Committee periodically uses an outside consultant to help 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, risk management and technology. 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 Company's 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 November of 2013. 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. 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 used for Executive compensation purposes ("Peer Group") (see page 37), which aligns with its Executive compensation philosophy.
The following chart shows the Director fees effective since January 1, 2012:
Fees Earned by Directors in 2013
| Director Name | | Fees Earned or Paid in Cash | | Stock Awards (1) | | Total | | ||||||||
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Betsy J. Bernard | $121,000 | $114,992 | $235,992 | |||||||||||||
Jocelyn Carter-Miller | $128,000 | $114,992 | $242,992 | |||||||||||||
Gary E. Costley | $120,000 | $114,992 | $234,992 | |||||||||||||
Michael T. Dan | $119,500 | $114,992 | $234,492 | |||||||||||||
Dennis H. Ferro | $118,500 | $114,992 | $233,492 | |||||||||||||
C. Daniel Gelatt | $115,000 | $114,992 | $229,992 | |||||||||||||
Sandra L. Helton | $137,000 | $114,992 | $251,992 | |||||||||||||
Richard L. Keyser | $109,000 | $114,992 | $223,992 | |||||||||||||
Luca Maestri | $115,000 | $114,992 | $229,992 | |||||||||||||
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 2013 are listed in the table, "Qualified 401(k) Plan and Excess Plan," on pages 54-55.
Restricted Stock Unit Grants
Directors receive an annual grant of restricted stock units ("RSUs"). The grant made in 2013 was made under the Principal Financial Group, Inc. 2005 Director Stock Plan. If approved by shareholders future grants (including those made at the 2014 annual meeting) will be made pursuant Principal Financial Group, Inc. 2014 Directors Stock Plan ("2014 Director 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, 2013, each Director had the following aggregate number of outstanding stock options and restricted stock units as a result of Director compensation in 2013 and prior years, including additional RSUs as the result of dividend equivalents:
| Director Name | | Total Stock Options Outstanding Fiscal year End 2013 (shares)(1) | | Total RSUs outstanding Fiscal Year End 2013 (shares) | | ||||||
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Betsy J. Bernard | 0 | 27,596 | ||||||||||
Jocelyn Carter-Miller | 0 | 29,462 | ||||||||||
Gary E. Costley | 0 | 27,596 | ||||||||||
Michael T. Dan | 0 | 25,269 | ||||||||||
Dennis H. Ferro | 0 | 13,431 | ||||||||||
C. Daniel Gelatt | 0 | 32,104 | ||||||||||
Sandra L. Helton | 0 | 27,596 | ||||||||||
Richard L. Keyser | 1,885 | 31,643 | ||||||||||
Luca Maestri | 0 | 9,108 | ||||||||||
Elizabeth E. Tallett | 0 | 31,643 |
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 nonemployee 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. Directors are also covered under the Company's Business Travel Accident Insurance Policy and Directors' and Officers' insurance coverage. In 2013, 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.
PROPOSAL TWO – APPROVAL OF THE PRINCIPAL FINANCIAL GROUP, INC.2014 DIRECTORS STOCK PLAN
Introduction
The Board believes that encouraging stock ownership by nonemployee directors through the use of stock based incentive compensation both aligns such directors' economic interests with those of shareholders, and assists the Board in attracting and retaining qualified directors.
The number of shares authorized for issuance under the Principal Financial Group, Inc. 2005 Directors Stock Plan (the "2005 Director Plan") was intended to provide the basis for making grants for a period of several years following the Demutualization, with the expectation and understanding that the Company would seek the approval of shareholders to make additional awards for a longer period of time. Based on the success the Company has achieved in using stock based awards, the Board believes that it continues to be appropriate to have the ability to grant stock options, restricted stock and restricted stock units to nonemployee directors, as is authorized under the 2005 Director Plan (although the Board believes there should be some modification to the manner in which such awards are made). Accordingly, the Nominating and Governance Committee has recommended and the Board has adopted, subject to shareholder approval, the Principal Financial Group, Inc. 2014 Directors Stock Plan (the "2014 Director Plan").
Upon approval of the 2014 Director Plan by shareholders, no new grants will be made under the 2005 Director Plan, although shares remaining available for grant under the 2005 Director Plan will become available for grant under the 2014 Director Plan. However, in the event that shareholders do not approve the 2014 Director Plan at the 2014 Annual Meeting, the Nominating and Governance Committee will continue to grant awards under the 2005 Director Plan.
The Board of Directors recommends that shareholders vote "for" approval of the 2014 Director Plan.
Summary of the 2014 Director Plan
The following summary of the 2014 Director Plan is qualified in its entirety by reference to the complete text of the 2014 Director Plan, which is attached to this proxy statement as Appendix A.
Shares Available for Issuance
Subject to adjustment upon the occurrence of certain events described below, a maximum of 200,000 shares, plus any shares of Common Stock remaining available for grant under the 2005 Director Plan at the date the shareholders approve the 2014 Directors Plan, may be issued under the 2014 Director Plan in respect of annual and discretionary stock based awards. Authorized but unissued shares or treasury shares may be used to satisfy awards under the 2014 Director Plan.
Shares subject to awards under the 2014 Director Plan or the 2005 Director Plan that have lapsed, are forfeited or cancelled or are settled without the issuance of stock, in each case after the effective date of the 2014 Director Plan, will be available for awards under the 2014 Director Plan. This includes shares that are withheld from an award to satisfy the participant's tax obligations. Additionally, shares owned by participants that are delivered to the Company to pay all or a portion of the exercise price of any award will also be available for awards under the 2014 Director Plan.
If the Nominating and Governance Committee determines that any stock dividend, stock split, recapitalization, merger, consolidation, combination, spin off, distribution of assets to stockholders (other than ordinary cash dividends), exchange of shares, or other similar corporate event affects the shares, then the Nominating and Governance Committee shall make such equitable adjustments in the number and kind of shares which may thereafter be awarded or optioned under the 2014 Director Plan, the number and kind of shares subject to outstanding options and awards and the respective grant or exercise prices as it determines to be appropriate.
Annual Grants and Discretionary Grants
The 2014 Director Plan provides for a specific level of annual grants having a value of $115,000 to be made to each nonemployee director in the form of restricted stock units. The 2014 Director Plan also authorizes the Nominating and Governance Committee to make additional grants in its discretion which may be in the form of restricted stock, restricted stock units, stock options and other stock based awards. However, the 2014 Director Plan provides that in no event shall the value of any awards granted to any eligible director in any year by reason of the exercise of any discretionary authority afforded the Committee under the Plan (including the authority to increase the value of the standard annual grant) exceed $230,000 (or, in the case of any participant who is serving as the Chairman of the Board and who is not an employee of the Company, $500,000). This limit applies to grants that are made in addition to the stated annual grant value of $115,000 permitted under the 2014 Director Plan. Each of the 10 nonemployee directors expected to continue serving on the Board after the Annual Meeting will be eligible to receive awards under the 2014 Director Plan.
Annual Grants. Effective immediately following each annual meeting of shareholders occurring when the 2014 Director Plan is in effect (including the 2014 Annual Meeting), each nonemployee director then in office will receive an annual grant comprised of restricted stock units having a value of approximately $115,000 (or such greater or lesser amount as the Nominating and Governance Committee shall determine from time to time). Under the 2014 Director Plan, there will be no annual stock option grants to any nonemployee directors, consistent with the terms of the 2005 Director Plan.
If a person becomes a nonemployee director after the effective date of the 2014 Director Plan and other than on the date of an annual meeting of shareholders, it is expected that such nonemployee director shall receive a pro rata award, based on the dollar value used to determine the grant of restricted stock units under the 2014 Director Plan immediately following the last shareholder meeting and such person's expected service through the next annual shareholder meeting. For purposes of the 2014 Director Plan, the Nominating and Governance Committee will determine the aggregate value of each award using valuation methodologies that are commonly used in U.S. compensation practices to value awards of a similar type and nature and the value of a share of Common Stock will be determined based on closing stock price of such stock on the New York Stock Exchange on the date of the grant.
Annual awards of restricted stock units made under the 2014 Director Plan will become vested, subject to the nonemployee director's continued service on the Board, on the scheduled date of the next annual meeting of shareholders following such annual grant of restricted stock units. Unless the Nominating and Governance Committee otherwise determines prior to or at grant, a director's vested restricted stock units from annual awards shall be distributed in shares as soon as possible after the director's termination of Board service.
Discretionary Grants. The 2014 Director Plan also authorizes the Nominating and Governance Committee to make grants of restricted stock, restricted stock units, stock options and/or stock based awards to nonemployee directors, which would be in addition to the annual grants described in the preceding paragraphs. These discretionary grants may be made in the form of any type of award authorized for grant under the 2014 Director Plan and may relate to such number of shares of Common Stock as the Nominating and Governance Committee shall determine.
Administration
The 2014 Director Plan will be administered by the Nominating and Governance Committee. The Nominating and Governance Committee shall have the sole and complete authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the 2014 Director Plan as it shall deem advisable, and to interpret the terms and provisions of the 2014 Director Plan. However, no member of the Nominating and Governance Committee may participate in any decision that applies to his or her benefits or entitlements under the 2014 Director Plan, unless such decision applies generally to all nonemployee directors.
Subject to the express terms of the 2014 Director Plan (including the limitations applicable with respect to the terms of annual grants), the Nominating and Governance Committee has broad discretion as to the specific terms and conditions of each award and any rules applicable thereto. Awards may not be assigned or transferred, except by will or the laws of descent and distribution, pursuant to a qualified domestic relations order, to the participant's immediate family and to other permitted transferees under rules established by the Nominating and Governance Committee.
Restricted Stock or Units
Under the 2014 Director Plan, the Nominating and Governance Committee may grant restricted stock and restricted stock units. Unless otherwise determined by the Nominating and Governance Committee, each annual grant (described above) made to non-employee directors will consist of restricted stock units. The Nominating and Governance Committee may determine the number of shares of restricted stock or the number of restricted stock units that would be granted as part of any discretionary award. The Nominating and Governance Committee has the power to determine the other terms and conditions of restricted stock and restricted stock unit awards, including, without limitation, determining the form (that is, shares of Common Stock, cash or a combination of cash and stock) and the timing of payment in respect of restricted stock units. Unless otherwise determined by the Nominating and Governance Committee at the time of grant, the annual grant of restricted stock units shall vest on the scheduled date of the first annual meeting of shareholders scheduled to occur after the date such restricted stock units are granted.
If the Nominating and Governance Committee does not permit an earlier distribution date, subject to any deferral election made in accordance with such conditions as the Nominating and Governance Committee shall determine, payment shall be made in respect of all restricted stock units granted to a nonemployee director in connection with annual grants as soon as practicable after the cessation of the director's service on the Board. Discretionary grants of restricted stock units will be distributed in accordance with the terms determined by the Nominating and Governance Committee at the time of grant. Unless determined otherwise by the Nominating and Governance Committee, a nonemployee director shall forfeit any restricted stock or restricted stock units that are not vested as of the time of any such termination of service.
Shares of restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered until the restrictions have lapsed. Subject to the forfeiture and transfer restrictions applicable to the award, a participant will have all of the rights of a shareholder in respect of any award of restricted stock, including the right to vote such shares. Generally, a nonemployee director will not currently receive dividends and other distributions paid with respect to restricted stock. Instead, all dividends and distributions will be invested in additional shares of Common Stock that will become vested and nonforfeitable and payable upon the same terms and conditions applicable to the shares of restricted stock in respect of which they were paid. In the event that dividends and distributions are paid on shares of Common Stock, dividend equivalents will be credited in respect of shares underlying restricted stock units awarded to nonemployee directors and such amounts will become vested, payable and forfeitable on the same terms as the restricted stock units in respect of which they were paid.
Stock Options
The Nominating and Governance Committee may grant nonemployee directors discretionary awards of stock options. The options granted under the 2014 Director Plan may only be non statutory options (as opposed to the 2014 Stock Incentive Plan, where the options may also be incentive stock options). The exercise price of any stock option granted may not be less than 100% of the fair market value of the underlying shares at the time of grant, and the Nominating and Governance Committee is not permitted to subsequently reduce the exercise price or otherwise reprice granted options without shareholder approval, except for adjustments in connection with changes in capitalization described above in the section "Shares Available for Issuance."
The Nominating and Governance Committee has discretion to set the other terms and conditions of any options, but under no circumstances may an option have a term exceeding ten years from the date of grant. An option holder may satisfy the exercise price in cash or, at the discretion of the Nominating and Governance Committee, by exchanging shares owned by the optionee, by a combination of cash and shares, or in accordance with any other procedure or arrangement approved by the Nominating and Governance Committee. However, no method of exercise is permitted that would require the Company to loan a participant funds or otherwise extend credit to the participant. The Nominating and Governance Committee may permit nonemployee directors to defer amounts payable to such directors, upon exercise of options upon the terms and conditions it may establish from time to time.
In the event that a nonemployee director's service terminates, any option that has not become exercisable prior to such termination will be canceled. Any option that is exercisable at the time of such termination will remain exercisable until the earlier of five years from the date that such director's service terminated and the stated term of the option (which cannot extend beyond the tenth anniversary of the grant date of the option.
Other Stock Based Awards
The Nominating and Governance Committee may also grant to nonemployee directors other stock based awards including, but not limited to, grants of stock and offers to purchase common stock. Such awards shall be granted on such terms and conditions as the Nominating and Governance Committee shall determine.
Term of the 2014 Director Plan and Amendments
No award may be granted under the 2014 Director Plan after the tenth anniversary of the date that the plan is approved by shareholders. The 2014 Director Plan may be amended or terminated at any time by the Board, except that no amendment may adversely affect existing awards. Likewise, none of the following amendments may be made without shareholder approval: (i) an increase in the number of shares available for issuance under the plan; (ii) a decrease in the minimum exercise price at which an option is granted or any other repricing of outstanding options, including cancelation of an option when the exercise price exceeds the fair market value of a share of common stock in exchange for cash or another award, except as otherwise provided; (iii) an extension of the maximum term for options granted under the plan or (iv) any other amendment for which shareholder approval is otherwise necessary to comply with any tax or regulatory requirement, including any approval requirement which is imposed by the rules of the New York Stock Exchange, that the Nominating and Governance Committee determines to be applicable.
Description of Federal Income Tax Consequences under the 2014 Directors Plan
The federal income tax consequences of grants of restricted stock, restricted units or stock options made under the 2014 Director Plan are substantially similar to those for each of the corresponding grant types described under "Proposal Three, Approval of The Principal Financial Group 2014 Stock Incentive Plan — Description of Federal Income Tax Consequences under the 2014 Stock Incentive Plan," except that nonemployee directors may not receive options that qualify as incentive stock options.
New Plan Benefits Table
The following table sets forth the awards that will be made in 2014 pursuant to the annual grant provisions of the 2014 Director Plan, if shareholders approve the 2014 Director Plan. While the ultimate awards will be denominated in terms of restricted stock units that represent a contractual right to receive an equivalent number of shares, the table below shows the authorized dollar equivalent values for each such award. That is because the program is designed to convey a grant date award value that is measured by a specified dollar equivalent. The actual number of shares and restricted stock units with respect to these awards will be determined by dividing the dollar equivalent value by closing price of a share of Common Stock immediately preceding the date of grant, (which is the practice expected to be applied with respect to awards under the 2014 Stock Incentive Plan), which would be the date of the Annual Meeting if the shareholders approve the 2014 Director Plan.
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No awards will be made to Company Executives or employees under the 2014 Director Plan. Any awards to be made to such individuals will be made under the 2014 Stock Incentive Plan, which is described below under the heading, "Proposal Three — Approval of the Principal Financial Group, Inc. 2014 Stock Incentive Plan."
EXECUTIVE COMPENSATION
Contents: | | Page | ||||||
Compensation Discussion & Analysis | | |||||||
• 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 | | |||||||
• Long term Incentive Compensation | | |||||||
• 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, Inc.'s Executive compensation objectives, and philosophy. It also describes our 20132015 compensation program and reviews the outcomes, including the Company's financial performance in 2013. 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, recommendedas part of the planned succession process, Daniel J. Houston was promoted to the Board that itposition of CEO. Effective May 17, 2016, Mr. Houston will also be included in this Proxy Statement. Our Named Executive Officers in 2013 were:Chairman of the Board.
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Insurance Solutions segments of our operations. He has held his current title since January 1, 2010. 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 2013
Highlights:
Corporate highlights
2013 ended with veryDespite external challenges in 2015, such as the volatile equity market conditions and foreign currency translation, we had strong results, posting both record total companywith operating earnings for the year(1) of $1.27 billion in 2015 compared to $1.32 billion in 2014. The Company continued to have strong fundamentals, solid momentum and record assets under management. These results were particularly strong in light of continued macroeconomic volatility, demonstrating the strengthgood underlying growth.
In 2015, 93% of our global investment management strategyoptions were above median for five-year performance at year-end, and 76 of our ability to focusrated funds had 4 or 5 stars from Morningstar. This strong investment performance, responsive service, and execute.
We also saw the growth potential (and diversification benefits) of our U.S. Insurance Solutions businesses, which delivered a 3120 percent increase compared to 2012. Full year 2013in pre-tax operating earnings EPS increased 32 percent to $3.55, compared to $2.69 for full year 2012.
Divisional highlights
In 2013,2015, the Company's total shareholder return was 76%, which was higher thanslightly above the average of our Peer Group used for compensation purposes (60%(–10.5% vs. –16.6%). In addition, our 3-yearOur three year total shareholder return also continues to be higher, with a 3-yearthree year total shareholder return of 59%71%, compared to an average total shareholder return of 53%42% for companies in the Peer Group.
*Excludes The Hartford Financial, StanCorp, and Janus as they were removed from our Peer Group.Group in 2015.
2013 2015 Compensation Highlights
222016 Proxy Statement | | |
Compensation Program Philosophy and Policies
Compensation Philosophy – —our compensation programs are designed to:
Compensation Policies – —Principal's Executive compensation program incorporates the following best practices:
Tableyear, business spousal travel, and gifts of Contentsnominal value given to all sales conference attendees.
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Summary of Compensation Elements:
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| | Compensation Component | | | | Objective | | | | Description and | | |
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| 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 | | ||||
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| 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 Executive. Actual bonuses depend on achievement relative to the Based on the Committee's assessment of performance, actual bonuses for | | ||||
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| Long Term Incentive Compensation | | | Motivates and rewards long term corporate performance as well as the Executive's contribution to achieving our long term objectives. Reinforces the link between the interests of the Executives and shareholders. Encourages retention. | | | Each year, the Committee establishes the long term award opportunity for each Named Executive Officer. One half of the award is granted in stock options and The PSUs vest based on The PSUs granted in The PSUs granted in | | ||||
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242016 Proxy Statement | | |
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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 U.S. based | | |||||||||
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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 | | | | | Refer to pages | | ||||||||
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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:
TheCook advises 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 nonemployee Directors.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 conflict 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 (otherother than himself).himself. These recommendations are based on the Executive's performance, the 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.decisions for Executives.
Themanagement, including the CEO, takes no parthas 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.
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Cook reviewsconducts 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 20132015 which influenced the Committee's decisions for the 2014 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 Peer Group of companies it uses to compare Executive compensation every other year as part of Cook's biennial study. Cook recommends an appropriate Peer Group of public, 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. No changesAs a result of the most recent review, a decision was made to the Peeromit Hartford Financial Services due to its business mix and Janus Capital Group were madeand StanCorp Financial as they are much smaller than Principal. Voya Financial was added, as it is similar in 2013.size and has a similar business mix as Principal. The companies in the Peer Group used in Cook's 20132015 analyses to assist in decisions on 20142016 compensation were:
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• Affiliated Managers Group | | • Invesco | | • MetLife |
• Ameriprise Financial | | •
| | • Prudential Financial |
• Eaton Vance | | •
|
| |
|
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 decisions.2(2). Further, every two to three years, the Company's non 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 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.
262016 Proxy Statement | | |
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 executiveExecutive compensation program as a result of the analysis in 20132015 because the programit continues to meet the Company's objectives.
2013 2015 Executive Compensation Decisions
The Committee made compensation decisions for the Named Executive Officers based on the following factors:on:
2 The 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 C.
The Committee also considers the tax and accounting consequences of each element of compensation, and tries to maximize the tax deductibility to the CompanyPrincipal of compensation under Section 162(m) of the Internal Revenue Code ("Tax Code"). This Tax Code section limits 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 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 2013,2015, Messrs. Zimpleman, Houston, Dunbar, McCaughan, and Valdés were Covered Employees.
| | 2016 Proxy Statement27 |
The chart below shows the 20132015 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.
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 salaries1(1) of the Named Executive Officers.
| Named Executive Officer | | 2011 | | 2012 | | 2013 | | Percent Increase 2012 to 2013 | | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Zimpleman | $900,000 | $900,000 | $925,000 | 2.8% | ||||||||||||||||
Lillis | $436,000 | $475,000 | $500,000 | 5.3% | ||||||||||||||||
Houston | $525,000 | $550,000 | $572,000 | 4.0% | ||||||||||||||||
McCaughan | $570,500 | $600,000 | $615,000 | 2.5% | ||||||||||||||||
Valdés | — | $525,000 | $546,000 | 4.0% |
| | | | | | | | | | | | | | | | | | | | | ||||
| | 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% | | |||||||
| | | | | | | | | | | | | | | | | | | | |
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 deductible to the Company.
282016 Proxy Statement | | |
The maximum aggregate bonus amount for the Named Executive Officers is 2% of annual operating income ("Bonus Pool"). For 2013,2015, the maximum bonuses were:
| | | | | | | | | | | | | ||||
| | Named Executive Officer | | | | Maximum Award as Percentage of the Annual Incentive Pool | | | | Maximum Potential Award Payment | | | ||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | ||||
| | CEO | | | | 35% | | | | | $ | 10.4 million | | | ||
| | | | | | | | | | | | | ||||
| Second highest Paid Covered Employee (McCaughan) | | | | | | $ | 7.4 million | | |||||||
| | | | | | | | | | | | | ||||
| | Third highest Paid Covered Employee | | | | | | | | $ | 5.9 million | | | |||
| | | | | | | | | | | | | ||||
| Fourth highest Paid Covered Employee | | | 10% | | | $ | 3.0 million | | |||||||
| | | | | | | | | | | | | ||||
| | CFO (Lillis) | | | | 10% | | | | | $ | 3.0 million | | | ||
| | | | | | | | | | | | |
The Committee sets the target and maximum annual incentive awards for each Named Executive Officer. The Committee 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 | | 2011 | | 2012 | | 2013 | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Zimpleman | 150% | 150% | 175% | |||||||||||||
McCaughan | 250% | 300% | 300% | |||||||||||||
Houston | 125% | 125% | 125% | |||||||||||||
Valdés | n/a | 75% | 75% | |||||||||||||
Lillis | 75% | 100% | 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 award 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.
Performance Goal Setting and Measurement Process
The Board meets each September to review the Company's long 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.
TableFollowing the completion of Contents
Thefiscal 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 |
In determining corporate performance for 2013,2015, the Committee reviewed Company achievements on these key financial goals:
| Goal | | 2013 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 2013, the target for operating earnings was $1 billion and the target for earnings per diluted share was $3.34. Actual 2013 operating earnings were $1,059.9 million and EPS was $3.55. 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 | $595 million | $694 million | ||||||||||||||||||||||||
• US Insurance Solutions | $205 million | $197 million | ||||||||||||||||||||||||
McCaughan – Principal Global Investors | $95 million | $103 million | ||||||||||||||||||||||||
Valdés- Principal International | $260 million | $215 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 435%. | ||||||||||||||||||||||||
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 | 13-19 basis points | 15 basis points | ||||||||||||||||||||||||
Commercial mortgage loan losses | 5-9 basis points | 6 basis points | ||||||||||||||||||||||||
4. | Achieve identified sales targets require appropriate growth. | The Company had 2013 sales growth as outlined below, by business area: | ||||||||||||||||||||||||
Business Unit | Target | Result | ||||||||||||||||||||||||
Houston | ||||||||||||||||||||||||||
• Retirement & Investor Services Sales | $29.4 billion | $30.94 billion | ||||||||||||||||||||||||
• Life Sales | $234.0 million | $209.5 million | ||||||||||||||||||||||||
• Specialty Benefits premium and fees | $1.5 billion | $1,492.7 billion | ||||||||||||||||||||||||
McCaughan | ||||||||||||||||||||||||||
• Principal Global Investors % growth in non-affiliated management fees | 15% | 12.4% | ||||||||||||||||||||||||
Valdés | ||||||||||||||||||||||||||
• Principal International net cash flow | $14.2 billion | $8.5 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. In addition, Messrs. McCaughan and Valdés had operating earnings goals specific to the business units they oversee: | | |||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | 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 | | | | | | | | |||||||||||||
| | | | | | • Retirement & Investor Services sales | | | $11,700M | | | $8,774.2M | | | | |||||||||||
| | | | | | • Life sales | | | $205M | | | $170.7M | | | | |||||||||||
| | | | | | • Specialty Benefits premium and fees | | | $320M | | | $314.2M | | | | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | McCaughan | | | | | | | | |||||||||||||
| | | | | | • Principal Global Investors % growth in non-affiliated management fees | | | 9.0% | | | 4.1% | | | | |||||||||||
| | | | | | • Mutual fund asset sales | | | $21,550M | | | $22,356.5M | | | | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Valdés | | | | | | | | |||||||||||||
| | | | | | • Principal International net cash flow | | | $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 | 2013 Salary | 2013 Target | Final Award | % of Target | Reduction from Maximum Award | | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| Zimpleman | $925,000 | 175% | $2,137,000 | 132% | $7,263,000 | ||||||||
| Lillis | $500,000 | 100% | $630,000 | 126% | $2,070,000 | ||||||||
| Houston | $572,000 | 125% | $858,000 | 120% | $3,142,000 | ||||||||
| McCaughan | $615,000 | 300% | $2,325,000 | 126% | $5,775,000 | ||||||||
| Valdés | $546,000 | 75% | $467,000 | 114% | $2,233,000 |
| | | | | | | | | | | | ||||
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 46-47.36-38.
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 wide goals.
The Committee establishes a target long term incentive award opportunity for each Named Executive Officer stated as a percentage of each Named 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 Named Executive Officers may vary considerably from the grant date fair value of the Award Granted, due to the Company's performance and changes in share price that occur after the grant.
2013 Long Term Incentive Target & Grant (as % of base salary) | ||||||||
| ||||||||
| Named Executive Officer | Target % | Award Granted | | ||||
---|---|---|---|---|---|---|---|---|
| Zimpleman | 525% | 525% | |||||
| Lillis | 275% | 300% | |||||
| McCaughan | 350% | 325% | |||||
| Houston | 350% | 375% | |||||
| Valdés | 225% | 235% |
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 Executive 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 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 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 year period (with each three year period treated as a "Performance Cycle"). Executives may defer the receipt of PSUs.
For the 20132015 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 a 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.
2013-2015 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 | $27.20 | $32.00 | $41.60 |
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 OIthreshold performanceobjective 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's results and during an open window period.results. The Committee formalized its long 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 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 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 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 qualifiednon-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 midcareer 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 51-5541-43 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 NonQualifiedNon-Qualified Deferred Compensation Table on pages 53-5544-45 provides additional information about the Excess Plan.
The value of the retirement and savings plans for Non GrandfatheredNonGrandfathered Participants (see page 52)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 51)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, the companyCompany has balanced realigning benefits to the marketplace with current market 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 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"), 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. In 2010, the Company revised its Change of Control Agreements for Executives that generally reduced severance amounts as multiples of cash compensation and eliminatedThese agreements do not provide excise tax gross ups. See pages 56-5946-48 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 56 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 | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | ||||||||
| | 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 Executives. The CompanyPrincipal 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 engaged in fraud or intentional misconduct that caused the restatement of the Company's financial statements, and that the amount of the Executive'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 Executives, from:
342016 Proxy Statement | | |
Succession Planning
The Human Resources Committee, the CEO and the 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. Costley
C. Daniel GelattRichard L. KeyserRoger C. Hochschild
Elizabeth E. Tallett
of Employee Incentive Plans
The Human Resources Compensation Department and the chief risk officers in the business units conducted a review and analysis of the Company's employee incentive compensation plans to determine whether compensation policies or practicesthe plans are reasonably likely to have a materiallymaterial adverse effect on the Company, and reviewed their processes and conclusions with the Chief Risk Officer. The following factors, among others, were assessed:
Some key factors that mitigate risks of the Company's incentive plans are the Company's stock ownership guidelines for Executives, the compensation recovery policy and the Human Resources Committee's ability to exercise its judgment in evaluating the quality of performance achievements when determining earned compensation. The CompanyPrincipal prohibits employees from purchasing CompanyPrincipal securities on margin (except for the exercise of stock options), engaging in short sales or trading in any put or call 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 the 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 2011, 20122013, 2014 and 2013.2015.
| 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 | 2013 | $919,231 | $0 | $2,428,124 | $2,428,121 | $2,137,000 | $1,041,951 | $80,474 | $9,034,901 | |||||||||||||||
Chairman, | 2012 | $900,000 | $0 | $2,249,990 | $2,491,679 | $1,282,500 | $3,605,227 | $80,329 | $10,609,725 | |||||||||||||||
President & CEO | 2011 | $876,923 | $0 | $1,799,986 | $1,993,320 | $1,302,000 | $3,160,566 | $72,732 | $9,205,527 | |||||||||||||||
Lillis | 2013 | $494,231 | $0 | $750,001 | $749,982 | $630,000 | $811,848 | $42,651 | $3,478,713 | |||||||||||||||
Executive Vice | 2012 | $466,000 | $0 | $653,136 | $723,308 | $443,000 | $1,412,152 | $24,571 | $3,722,167 | |||||||||||||||
President & CFO | 2011 | $427,692 | $0 | $435,993 | $482,827 | $276,000 | $974,268 | $22,927 | $2,619,707 | |||||||||||||||
Houston | 2013 | $566,923 | $0 | $1,072,505 | $1,072,513 | $858,000 | -$50,354 | $79,460 | $3,599,047 | |||||||||||||||
Pres. Retirement, | 2012 | $544,231 | $0 | $1,031,260 | $1,142,017 | $612,000 | $846,704 | $88,603 | $4,264,815 | |||||||||||||||
Ins. & Financial Svs | 2011 | $519,231 | $0 | $853,108 | $944,764 | $526,000 | $507,677 | $74,386 | $3,425,166 | |||||||||||||||
McCaughan | 2013 | $611,539 | $0 | $999,377 | $999,379 | $2,325,000 | $80,742 | $13,290 | $5,029,327 | |||||||||||||||
Pres. Global | 2012 | $593,192 | $0 | $974,995 | $1,079,730 | $1,602,000 | $76,897 | $13,673 | $4,340,487 | |||||||||||||||
Asset Management | 2011 | $565,423 | $0 | $855,746 | $947,681 | $1,272,000 | $73,235 | $6,329 | $3,720,414 | |||||||||||||||
Valdés | 2013 | $541,154 | $0 | $641,538 | $641,536 | $467,000 | $90,767 | $63,008 | $2,445,003 | |||||||||||||||
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 | $74,615 | $93,961 | |||||||
Lillis | $14,635 | $24,173 | $38,808 | |||||||
Houston | $13,962 | $36,892 | $50,854 | |||||||
McCaughan | $17,500 | $0 | $17,500 | |||||||
Valdés | $13,577 | $35,215 | $48,792 |
| | | | | | | | | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | ||||||
| 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 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% | |||||||||
February 25, 2013 | $30.70 | 53.30% | 6.5 years | 2.997% | 1.13% |
| | | | | | | | | | | | | |||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | |||||
| 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 20132015 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 2013 PSUs at Maximum Payout | Amount by Which Aggregate Grant Date Values Reported Would be Increased | | ||||
---|---|---|---|---|---|---|---|---|
Zimpleman | $3,642,187 | $1,214,062 | ||||||
Lillis | $1,125,002 | $375,001 | ||||||
Houston | $1,608,757 | $536,252 | ||||||
McCaughan | $1,499,066 | $499,689 | ||||||
Valdés | $962,307 | $320,769 |
| | | | | ||
---|---|---|---|---|---|---|
| | | | | ||
| 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 | $14,423 | $66,051 | $80,474 | |||||||
Lillis | $14,534 | $28,117 | $42,651 | |||||||
Houston | $8,724 | $70,736 | $79,460 | |||||||
McCaughan | $165 | $13,125 | $13,290 | |||||||
Valdés | $12,122 | $50,886 | $63,008 |
| | | | | | | | | |||||
| 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 | $6,562 | $59,489 | $66,051 | |||||||
Lillis | $5,250 | $22,867 | $28,117 | |||||||
Houston | $9,962 | $60,774 | $70,736 | |||||||
McCaughan | $13,125 | $0 | $13,125 | |||||||
Valdés | $13,125 | $37,761 | $50,886 |
| | | | | | | | | |||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | |||||
| 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 | $1,618,750 | $9,400,000 | |||||||||||||||||||||||||||||||||||||||||||||
02/25/2013 | 19,773 | 79,092 | 118,638 | $2,428,124 | ||||||||||||||||||||||||||||||||||||||||||||
02/25/2013 | 203,190 | $30.70 | $2,428,121 | |||||||||||||||||||||||||||||||||||||||||||||
Lillis | N/A | $500,000 | $2,700,000 | |||||||||||||||||||||||||||||||||||||||||||||
02/25/2013 | 6,108 | 24,430 | 36,645 | $750,001 | ||||||||||||||||||||||||||||||||||||||||||||
02/25/2013 | 62,760 | $30.70 | $749,982 | |||||||||||||||||||||||||||||||||||||||||||||
Houston | N/A | $715,000 | $4,000,000 | |||||||||||||||||||||||||||||||||||||||||||||
02/25/2013 | 8,734 | 34,935 | 52,403 | $1,072,505 | ||||||||||||||||||||||||||||||||||||||||||||
02/25/2013 | 89,750 | $30.70 | $1,072,513 | |||||||||||||||||||||||||||||||||||||||||||||
McCaughan | N/A | $1,845,000 | $8,100,000 | |||||||||||||||||||||||||||||||||||||||||||||
02/25/2013 | 8,138 | 32,553 | 48,830 | $999,377 | ||||||||||||||||||||||||||||||||||||||||||||
02/25/2013 | 83,630 | $30.70 | $999,379 | |||||||||||||||||||||||||||||||||||||||||||||
Valdés | N/A | $409,500 | $2,700,000 | |||||||||||||||||||||||||||||||||||||||||||||
02/25/2013 | 5,224 | 20,897 | 31,346 | $641,538 | ||||||||||||||||||||||||||||||||||||||||||||
02/25/2013 | 53,685 | $30.70 | $641,536 |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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, 2013
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) | 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 | |||||||||||||||||||||
70,610 | 35,305 | $34.26 | 02/28/2021 | 56,952 | $2,808,287 | |||||||||||||||||||
59,538 | 119,077 | $27.46 | 02/27/2022 | 86,332 | $4,257,023 | |||||||||||||||||||
0 | 203,190 | $30.70 | 02/25/2023 | 81,022 | $3,995,207 | |||||||||||||||||||
Lillis (6) | 7,380 | 0 | $60.10 | 02/26/2018 | ||||||||||||||||||||
13,505 | 0 | $56.42 | 05/19/2018 | |||||||||||||||||||||
33,765 | 0 | $22.21 | 02/23/2020 | |||||||||||||||||||||
17,103 | 8,552 | $34.26 | 02/28/2021 | 13,795 | $680,224 | |||||||||||||||||||
17,283 | 34,567 | $27.46 | 02/27/2022 | 25,061 | $1,235,746 | |||||||||||||||||||
0 | 62,760 | $30.70 | 02/25/2023 | 25,026 | $1,234,043 | |||||||||||||||||||
Houston | 37,080 | 0 | $60.10 | 02/26/2018 | ||||||||||||||||||||
43,540 | 0 | $11.07 | 02/24/2019 | |||||||||||||||||||||
72,350 | 0 | $22.21 | 02/23/2020 | |||||||||||||||||||||
33,466 | 16,734 | $34.26 | 02/28/2021 | 26,992 | $1,330,995 | |||||||||||||||||||
27,288 | 54,577 | $27.46 | 02/27/2022 | 39,569 | $1,951,164 | |||||||||||||||||||
0 | 89,750 | $30.70 | 02/25/2023 | 35,788 | $1,764,686 | |||||||||||||||||||
McCaughan | 29,984 | 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 | |||||||||||||||||||||
158,555 | 0 | $11.07 | 02/24/2019 | |||||||||||||||||||||
79,365 | 0 | $22.21 | 02/23/2020 | |||||||||||||||||||||
33,570 | 16,785 | $34.26 | 02/28/2021 | 27,076 | $1,335,111 | |||||||||||||||||||
25,800 | 51,600 | $27.46 | 02/27/2022 | 37,410 | $1,844,708 | |||||||||||||||||||
0 | 83,630 | $30.70 | 02/25/2023 | 33,347 | $1,644,363 | |||||||||||||||||||
Valdés | 9,887 | $487,531 | ||||||||||||||||||||||
13,891 | 27,784 | $27.46 | 02/27/2022 | 20,144 | $993,324 | |||||||||||||||||||
0 | 53,685 | $30.70 | 02/25/2023 | 21,407 | $1,055,579 |
| | | | | | | | | | | | | | | | | | |||||||||
| | | | | 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 20132015 will vest on December 31, 20152017 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.
Named 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 NonEquity 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 20132015 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 (3) | 234,328 | $1,728,412 | 80,644 | $3,297,346 | ||||||||||||||||
Lillis (3) | 14,125 | $93,819 | 16,811 | $712,624 | ||||||||||||||||
Houston | 196,190 | $2,639,457 | 26,722 | $1,199,283 | ||||||||||||||||
McCaughan (3) | 100,451 | $1,077,317 | 39,129 | $1,592,557 | ||||||||||||||||
Valdés (3) | 35,516 | $549,803 | 11,729 | $500,640 |
| | | | | | | | | | ||||||
| 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 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 | |||||||||||||||||||||||||
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' 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. | ||||||||||||||||||||||||||
| | | | | | | | | | | | |
| 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 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 (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 benefit will be the Cash Balance Formula. He has not accrued any benefits under this plan since January 1, 2010. | 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): • The Company 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 after retirement benefits begin. For Non Grandfathered Participants only benefits accrued as of December 31, 2005 receive this adjustment. The Cost of Living adjustment is based on the Consumer Price Index (CPI). | |||||||||||||||||||||||||
| | | | | | | | | | | | |
| 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 qualified cash balance benefit formula in the DB Plan allows for benefits as an annuity or lump sum.
NQDB benefits may be paid as a lump sum at termination/retirement, or as an 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 they may elect for payments on a specified date 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 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 | $198,298 | $59,489 | $614,295 | $0 | $3,258,200 | |||||||||
Lillis | $45,734 | $22,867 | $116,737 | $0 | $551,184 | |||||||||
Houston | $81,032 | $60,774 | $334,403 | $0 | $1,669,721 | |||||||||
McCaughan | $0 | $0 | $508,093 | $0 | $2,615,000 | |||||||||
Valdés | $50,348 | $37,761 | $13,921 | $0 | $146,966 |
| | | | | | | | | | | | ||||||
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 1/1/2013 | Principal Life Match Prior to 1/1/2013 | Total | | |||||
---|---|---|---|---|---|---|---|---|---|---|
Zimpleman | $1,615,952 | $411,034 | $2,026,986 | |||||||
Lillis | $181,386 | $86,059 | $267,445 | |||||||
Houston | $553,582 | $334,017 | $887,599 | |||||||
McCaughan | $998,343 | $581,568 | $1,579,911 | |||||||
Valdés | $24,561 | $18,421 | $42,982 |
| | | | | | | | |||||
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
| | | | | | | | | | | | | ||||||
| Plan Feature | | | |||||||||||||||
Qualified 401(k) Plan | | | Excess Plan | | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | ||||||
| Deferrals | | | | | | ||||||||||||
| | | | | | | | | | | | | ||||||
| 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 | | ||||||||||
| | | | | | | | | | | | | ||||||
| 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 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 | | | | ||||||
| Principal LargeCap Value Institutional Fund | | | |||||||
| | Principal LargeCap S&P 500 Index Institutional Fund | | | | |||||
| Principal LargeCap Growth Institutional Fund | | | |||||||
| | Principal LargeCap Growth I Institutional Fund | | | | |||||
| Principal MidCap Institutional Fund | | | |||||||
| ||||||||||
| Principal SmallCap Value II Institutional Fund | | | | ||||||
| Principal SmallCap S&P 600 Index Institutional Fund | | | |||||||
| | Principal Small Cap Growth I Institutional Fund | | | | |||||
| Principal Real Estate Securities Institutional Fund | | | |||||||
| | Principal International Emerging Markets Institutional Fund | | | | |||||
| Principal Diversified International Institutional Fund | | | |||||||
| | Principal LifeTime Strategic Income Institutional Fund | | | | |||||
| Principal LifeTime 2010 Institutional Fund | | | |||||||
| | Principal LifeTime 2020 Institutional Fund | | | | |||||
| Principal LifeTime 2030 Institutional Fund | | | |||||||
| | Principal LifeTime 2040 Institutional Fund | | | | |||||
| Principal LifeTime 2050 Institutional Fund | | | |||||||
| | Principal LifeTime 2060 Institutional Fund | | –0.80% | | | ||||
| Principal Money Market Institutional Fund | | | |||||||
| | Principal Core Plus Bond | | | | |||||
| Principal Inflation Protection Institutional Fund | | | |||||||
| | Principal Government & High Quality Bond Institutional Fund | | | | |||||
| Principal Financial Group, Inc. Employer Stock Fund | | | |||||||
| | 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 with an initial term through May 1, 2011, and the term of the agreement automatically extendsextended to create a new one year term unless either party providesprovided notice of an 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 affect 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 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.
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, 2013.2015:
| Named Executive Officer | | Severance | | Outplacement Services | | COBRA Reimbursement | | Total | | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Zimpleman | $5,087,500 | $10,000 | $0 | $5,097,500 | ||||||||||||||||
Lillis | $500,000 | $10,500 | $1,758 | $512,258 | ||||||||||||||||
Houston | $572,000 | $10,500 | $4,803 | $587,303 | ||||||||||||||||
McCaughan | $2,460,000 | $0 | $0 | $2,460,000 | ||||||||||||||||
Valdés | $546,000 | $10,500 | $4,653 | $561,153 |
| | | | | | | | | | ||||||
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 CompanyPrincipal has Change of Control Employment Agreements with each of the Named Executive Officers.Officers 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 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 of Control payments by the amount necessary to maximize the benefits received, determined on an after tax basis.
The severance and other benefits provided under these agreements will be available to Named 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 their employment. For a 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 received 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 Named 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 Named Executive Officer's termination, he 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 executivesExecutives 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, he 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 | $5,087,500 | $6,914,539 | $8,252,230 | $46,172 | $0 | $20,300,441 | ||||||||||||||||||||||
Lillis | $2,000,000 | $2,051,960 | $2,469,788 | $25,200 | $0 | $6,546,948 | ||||||||||||||||||||||
Houston | $2,574,000 | $3,114,602 | $3,715,850 | $59,704 | $0 | $9,464,156 | ||||||||||||||||||||||
McCaughan | $4,920,000 | $2,936,429 | $3,489,072 | $53,175 | $0 | $11,398,676 | ||||||||||||||||||||||
Valdés | $1,911,000 | $1,698,415 | $2,048,903 | $59,704 | $0 | $5,718,022 |
| | | | | | | | | | | | | | ||||||||
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 – APPROVAL OF THE PRINCIPAL FINANCIAL GROUP, INC. 2014 STOCK INCENTIVE PLAN
Proposal Two—Advisory Vote to Approve Executive Compensation
The Board of Directors recommends that shareholders vote "for" approval of the Principal Financial Group, Inc. 2014 Stock Incentive Plan.
The Company's 2010 Stock Incentive Plan was approved by shareholders at the 2010 Annual Meeting. The 2014 Stock Incentive Plan is substantially similar to the 2010 Stock Incentive Plan. Pursuant to this Proposal, shareholders are being asked to authorize for issuance an additional 7,800,000 shares of our common stock for the grant of awards under the 2014 Stock Incentive Plan.
Summary of the Stock Incentive Plan
The following summary of the 2014 Stock Incentive Plan is qualified in its entirety by reference to the complete text of the plan, which is attached to this proxy statement as Appendix A.
Shares Available for Issuance
Subject to adjustment upon the occurrence of certain events described below, a maximum of 7,800,000 shares, plus the number of shares remaining available for issuance under the 2010 Stock Incentive Plan at the date the 2014 Stock Incentive Plan is approved by shareholders, may be issued under the 2014 Stock Incentive Plan. Authorized but unissued shares or treasury shares may be used to satisfy awards under the 2014 Stock Incentive Plan. Shares subject to awards granted under the 2010 Stock Incentive Plan or the 2014 Stock Incentive Plan that lapse, are forfeited, or cancelled, or are settled without the issuance of stock, after the effective date of the 2014 Stock Incentive Plan, will be available for awards under the Plan. This includes shares that are withheld from an award to satisfy the employee's tax obligations. Additionally, shares owned by participants that are delivered to pay all or a portion of the exercise price of any award or to satisfy the employee's tax obligations in respect of awards under either of these plans, and shares that are purchased by the Company using cash proceeds received in connection with the exercise of an option, will increase the number of shares available for awards under the 2014 Stock Incentive Plan.
In the event of any stock dividend, stock split, recapitalization, extraordinary dividend, merger, consolidation, combination, spin off, distribution of assets to shareholders (other than ordinary cash dividends), exchange of shares or other similar corporate event that affects the shares, the Human Resources Committee shall make such equitable adjustments as it shall determine to be appropriate to the number and kind of shares which thereafter may be awarded or optioned under the 2014 Stock Incentive Plan, the number and kind of shares subject to outstanding options and awards, the respective grant or exercise prices and the individual award limits otherwise applicable with respect to certain awards under the Plan and summarized below.
If, pursuant to the agreements governing the acquisition of a business by the Company or one of its subsidiaries, the Company grants substitution options or other equity based awards to employees or service providers of the acquired business, the shares subject to such substitute awards shall neither count against the number of shares available for issuance under the 2014 Stock Incentive Plan nor be added to the number of awards issuable pursuant to the 2014 Stock Incentive Plan. In addition, the generally applicable provisions of the Plan (such as the limitations that an option must have an exercise price at least equal to the stock's fair market value on the date of grant that would limit the Company's ability to grant such substitute awards (which may have already become in the money) will not apply with respect to such substitute grants.
Administration
The 2014 Stock Incentive Plan will be administered by the Human Resources Committee. The Human Resources Committee will have the sole and complete authority to establish, amend, and rescind rules and regulations relating to the 2014 Stock Incentive Plan, provide for conditions deemed necessary or advisable to protect the interests of the Company, construe the terms of any award or any document evidencing the grant of an award and make all other determinations necessary and advisable for the administration and interpretation of the Plan in order to carry out its provisions and purposes. Subject to the express terms of the 2014 Stock Incentive Plan, the Human Resources Committee has discretion as to the specific terms and conditions of each award and
any rules applicable thereto, including but not limited to the effect thereon of the death, retirement or other termination of employment of the participant.
The Human Resources Committee may delegate to one or more officers of the Company the power to grant awards to participants whose title is below the level of Senior Vice President. However, only the Human Resources Committee or the Board may grant awards to Executive Officers or exercise other discretion under the 2014 Stock Incentive Plan with respect to awards granted to Executive Officers. The Human Resources Committee may also appoint agents (who may be officers or employees of the Company) to assist in the administration of the 2014 Stock Incentive Plan and may grant authority to such persons to execute agreements or other documents on its behalf.
The Human Resources Committee may condition the grant of any award upon the recipient agreeing to conditions or covenants in favor of the Company and/or one or more of its subsidiaries that might have effect following the termination of the recipient's employment and after the shares of Common Stock subject to the award have been transferred to the participant. These conditions and covenants may include restrictions on the ability to transfer the underlying shares of Common Stock, or covenants not to compete, not to solicit employees and customers, and not to disclose confidential information. The Human Resources Committee may also require that, after an option or other award has been exercised, the recipient disgorge any profit, gain or other benefit received from the award if the participant breaches any of these commitments.
The Human Resources Committee may make grants to any employee of the Company or any of the Company's subsidiaries, and to any natural person who provides services to the Company or a subsidiary, including as an agent. However, during any three year period, no individual may be granted options or stock appreciation rights (with tandem options and stock appreciation rights being counted only once with respect to this limit) in respect of more than 3,000,000 shares. During any 12 month period, no individual may be granted restricted stock, restricted stock units, performance shares and/or other stock based awards that are intended to comply with the performance based exception under Code Section 162(m) and are denominated in shares in respect of more than 250,000 shares when measured upon achievement of the performance objectives at targeted levels of performance. For performance above target, up to twice such number of shares may be payable. These limits are subject to adjustments in connection with a change in capitalization as described in "Shares Available for Issuance". The maximum dollar value payable to any individual with respect to performance units and/or other stock based awards granted in any 12 month period that are valued with reference to cash property other than shares is $10 million. Awards may not be assigned or transferred, except by will or the laws of descent and distribution, pursuant to a qualified domestic relations order, to the participant's immediate family and to other permitted transferees under rules established by the Human Resources Committee.
Stock Options and Stock Appreciation Rights
The Human Resources Committee may grant nonqualified stock options to officers, employees and agents and may grant stock options qualifying as incentive stock options under the Internal Revenue Code to officers and employees. The maximum number of shares issuable pursuant to incentive stock options that may be awarded under the 2014 Stock Incentive Plan is 7,8000,000 and no incentive stock options may be granted after the tenth anniversary of the effective date of the 2014 Stock Incentive Plan. The exercise price per share of Common Stock subject to either a nonqualified stock option or an incentive stock option will be not less than 100% of the fair market value, as defined in the 2014 Stock Incentive Plan, of such share on the date of grant. Further, the Human Resources Committee is not permitted to subsequently reduce the exercise price or otherwise reprice outstanding options without shareholder approval, except for adjustments in connection with a change in capitalization as described in "Shares Available for Issuance". The Human Resources Committee has discretion as to the terms and conditions upon which options will be exercisable, including the exercise schedule, but under no circumstances may an option have a term exceeding ten years from the date of grant.
An option holder may satisfy the exercise price in cash or by exchanging shares owned by the optionee, or by a combination thereof, or by any other procedure permitted by the Human Resources Committee. Additionally, to the extent permitted by the Human Resources Committee at or after the time of grant, an option holder may also "net exercise" an option. Pursuant to a net exercise the option holder is not required to pay the exercise price of the portion of the option being exercised. Instead, the Company will issue to the person exercising the option the number of shares that would be issued "net" of the exercise price. This means that such person will receive the greatest number of whole shares of Common Stock having a value equal to the excess of
the then fair market value of the number of shares for which the option is being exercised over the exercise price of such options.
In the event an employee terminates service by reason of disability or death, all options, whether or not then exercisable, will become immediately exercisable and will generally remain exercisable for a period of three years or for such shorter period as the Human Resources Committee shall determine at the time of grant. In the event an employee terminates service by reason of a normal or approved early retirement, all of the employee's options granted prior to the year of retirement and a prorated number of options granted in the year of retirement, determined based on the portion of the year of retirement that the participant was employed, will become immediately exercisable and will remain exercisable for the original term of the option, or for such shorter period as the Human Resources Committee shall determine at the time of grant. In the event an employee's service terminates for cause or by resignation other than in the circumstances addressed above, he or she will forfeit all of his or her outstanding options, whether or not then exercisable. In general, in the event an employee terminates service for any reason other than those listed above, all options then held by the employee that are then exercisable will remain exercisable for a period of 90 days. In no event may any option be exercisable after its stated maximum term, regardless if the above described rules might otherwise permit a longer period to exercise an option.
The Human Resources Committee may permit participants to defer amounts payable upon exercise of options upon the terms and conditions the Human Resources Committee establishes from time to time. In deciding whether and on what terms to permit any such deferral, the Human Resources Committee will take into account the tax laws pertaining to deferred compensation.
The Human Resources Committee may also grant Stock Appreciation Rights ("SARs") to employees, officers and agents that can either be freestanding awards or awards that are related to a stock option in such a way that the exercise of either the SAR or the stock option will cause the cancellation of the other award. The terms and conditions applicable with respect to any grant of a SAR will be substantially the same as applies to the grant of a stock option. This means that the vesting of a SAR, and the time that a recipient of a SAR will have to exercise the SAR after termination of his or her service to the Company or a subsidiary, will be substantially the same as applies to a stock option.
Restricted Stock or Units
The Human Resources Committee also has the right to grant awards of restricted stock to employees, officers and agents at such times and for such number of shares of Common Stock and subject to such terms and conditions of such awards, including the establishment of performance goals for the grant of such awards based on one or more of the performance criteria described below for performance shares and units as the Human Resources Committee may determine. The Human Resources Committee may elect to grant any such person restricted stock units, which are contractual rights to receive shares of Common Stock or cash in an amount equal to the value of a specified number of shares of Common Stock in the future after the satisfaction of specified vesting conditions, that is the economic equivalent of an award of restricted stock. Any such award of restricted stock units shall be made on substantially the same terms as an award of restricted stock.
The Human Resources Committee will determine the terms and conditions applicable to a grant of restricted shares or restricted stock units. Shares of restricted stock may not be sold, assigned, transferred, pledged, or otherwise encumbered until the restrictions have lapsed. Certain limitations on the Committee's discretion in setting the vesting terms with regard to awards of restricted stock and restricted stock units, as well as performance shares, performance units and other stock based awards, that were included in the 2010 Stock Incentive Plan have been eliminated to provide the Committee maximum flexibility to determine the appropriate terms as they deem warranted by the circumstances then prevailing. Any shares of restricted stock or restricted stock units held by an employee, officer or agent whose service terminates due to normal or approved early retirement will generally vest at the time such shares or units would have vested had such participant's service continued. A prorated number of shares or units granted in the year of retirement, determined based on the portion of the year of retirement the participant was employed, will vest at the time such shares or units would have vested had such participant's service continued.
Unless the Human Resources Committee otherwise specifies at the time of grant, any shares of restricted stock or restricted stock units held by an employee, officer or agent whose service terminates due to his or her
death or disability will vest at the time of such termination. Upon any other termination, any shares of restricted stock or restricted stock units that have not previously vested will be forfeited unless the Human Resources Committee otherwise determines. The Human Resources Committee may permit participants who receive restricted stock or restricted stock units to defer receipt of such awards upon the terms and conditions the Human Resources Committee establishes from time to time.
Subject to the forfeiture and transfer restrictions applicable to the award, a participant will have all of the rights of a shareholder in respect of any award of restricted stock, including the right to vote such shares and receive dividends thereon and other distributions. However, if any dividends or distributions are paid in shares of Common Stock, the shares received as a dividend or distribution will be subject to the same forfeiture restrictions and restrictions on transferability as apply to the restricted stock with respect to which they were paid. The Human Resources Committee shall determine whether, and to what extent, a participant shall be entitled to receive the payment of dividend equivalents in respect of the number of shares of Common Stock underlying a grant of restricted stock units. Any shares credited in respect of any dividend equivalents will become vested and nonforfeitable upon the same terms and conditions applicable to the shares underlying the restricted stock units in respect of which they are payable, unless the Committee shall determine otherwise with respect to any Award that will become earned and vested solely upon the passage of time and the continued performance of services.
Performance Shares or Units
The Human Resources Committee may grant officers, employees and agents awards of performance shares or performance units, which awards will become earned and payable based on the achievement of performance goals, as established by the Human Resources Committee, during the applicable performance cycle. The 2014 Stock Incentive Plan permits the Human Resources Committee to establish performance goals based on either the total return to shareholders (whether in absolute terms or relative to performance at other companies or a published index) or upon the attainment of one or more of the following goals: stock price, operating earnings, operating income (before or after taxes), operating margin, gross margin, net earnings, return on equity, income, market share, combined ratio, level of expenses, growth in revenue, earnings before interest, taxes, depreciation and amortization (EBITDA), earnings before interest and taxes (EBIT), cash flow (including operating cash flow and free cash flow), cash flow per share (before or after dividends), earnings per share, book value per share, return on revenue, return on invested capital, return on assets, cash flow return on investment, cash flow return on capital, economic value added, improvements in or attainment of working capital levels and debt reduction, in each case either in absolute terms or relative to the performance of one or more similarly situated companies or a published index covering the performance of a number of companies. In the case of persons who are not Executive Officers of the Company, the Human Resources Committee has discretion to establish other performance criteria. The Human Resources Committee also has the discretion to condition payment of amounts in respect of performance shares and performance units on such additional factors as it shall determine on the grant date.
The Human Resources Committee will determine the value of each performance share and unit, the number of such shares and units for each performance cycle, the duration of each performance cycle and the number of performance shares and units that have been earned based on performance relative to the performance goals discussed above, but subject to the maximum award limits outlined above. Performance shares and units may also be deemed earned upon the occurrence of certain events, such as a change in control. Unless the Human Resources Committee otherwise determines, performance shares and units for in progress performance cycles will be forfeited and terminated if a participant's employment terminates, except that, unless the Human Resources Committee otherwise determines, if a participant's employment terminates due to death, disability or normal or early approved retirement, the participant or the participant's representative will receive all (or, in the event of a termination of employment due to death, disability or normal or approved early retirement during the first year of the performance period, a pro-rated portion) of the performance shares and units for the performance cycle that would have been earned had the participant continued employment for the full period.
The Human Resources Committee may provide on the grant date that, depending on actual performance measured against the stated performance goals, the amount payable in respect of performance shares will be a multiple of up to two times the number of performance shares if actual performance exceeds targeted levels. Payment of earned performance share and unit awards may, at the discretion of the Human Resources Committee, be distributed in the form of cash, shares of Common Stock or a combination thereof. Except to the extent that the exercise of (or the ability to exercise) such discretion in the case of awards to Executive Officers
intended to be other performance based compensation under Section 162(m)(4) of the Internal Revenue Code would cause them to fail to satisfy that requirement, the Committee may also adjust the performance criteria for any performance period as it deems equitable in recognition of unusual or non recurring events affecting the Company, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine.
The Human Resources Committee shall determine whether, and to what extent, a participant shall be entitled to receive the payment of dividend equivalents in respect of the performance shares. Any shares credited in respect of any dividend equivalents will become vested and nonforfeitable upon the same terms and conditions (including achievement of the applicable performance conditions) applicable to the shares underlying the performance shares in respect of which they are payable.
Other Stock Based Awards
The Human Resources Committee may also grant to employees, officers and agents other stock based awards including, but not limited to, grants of stock and offers to purchase Common Stock. Such awards shall be granted on such terms and conditions as the Human Resources Committee shall determine. The Human Resources Committee may, for example, use this authority under the 2014 Stock Incentive Plan to issue stock in satisfaction of the obligations of the Company and its subsidiaries under other compensatory plans or programs, such as pursuant to an annual bonus plan or deferred compensation program.
Change of Control
Except as provided below, if the Company experiences a "change of control" (as defined in the 2014 Stock Incentive Plan), each option and SAR and each award of restricted stock, each restricted stock unit grant and each other stock based award will be treated as fully vested and will no longer be subject to forfeiture and transfer restrictions. Additionally, all outstanding performance shares and performance units will be deemed earned and be immediately payable, at the level of performance specified in the award agreement for each such award, regardless of the portion of the applicable performance period that will have elapsed prior to the date of such change of control. The Human Resources Committee may, in its discretion, provide that in connection with a change of control each option and SAR will be cancelled in exchange for an amount equal to the excess, if any, of the price paid in the change of control transaction over the exercise price or base value of such award.
For purposes of the 2014 Stock Incentive Plan, "change of control" includes any one or more of the following events:
However, in the event that a "change of control" occurs that does not constitute a change of control within the meaning of Section 409A of the Internal Revenue Code, no payment or distribution will be made in respect of
an outstanding award if such payment or distribution would result in the imposition of an additional tax on the recipient, though other modifications triggered by the change in control (including accelerated vesting) will still apply. In such an event, the participant will receive the value of such an award, as determined by the Human Resources Committee prior to the change in control, on the day after the six month anniversary of the participant's termination of employment or, if earlier, upon (i) the date that such award would have vested due to the passage of time, (ii) the last day of the performance period or (iii) if the award is vested at the time of the change of control, the date on which the award would have expired in accordance with its terms, as applicable.
Notwithstanding the foregoing, (i) there will be no acceleration of the vesting, or lapsing of restrictions, of any options, SARs, restricted stock, restricted stock units, or other stock based awards, (ii) performance shares and performance units will not be deemed earned, and (iii) there will be no payment made in respect of such awards by reason of the change of control if the Human Resources Committee (as constituted before the change in control) determines that each of the following conditions are satisfied:
Term of the 2014 Stock Incentive Plan and Amendments
No award may be granted under the 2014 Stock Incentive Plan after the tenth anniversary of the date, if any, that the plan is approved by shareholders. The 2014 Stock Incentive Plan may be amended or terminated at any time by the Board, except that no amendment may adversely affect existing awards. In addition, none of the following amendments may be made without shareholder approval: (i) an increase in the number of shares available for issuance under the plan; (ii) lowering the exercise price of an option or SAR after it is granted, canceling an option or SAR when the exercise price exceeds the fair market value of a share of Common Stock in exchange for cash or another award (other than in connection with a change of control), or taking any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal U.S. national securities exchange on which the Shares are listed; (iii) an extension of the maximum term for options or SARs granted under the plan or (iv) any other amendment for which shareholder approval is otherwise necessary to comply with any tax or regulatory requirement, including any approval requirement which is imposed by the rules of the New York Stock Exchange, that the Human Resources Committee determines to be applicable.
Description of Federal Income Tax Consequences under the 2014 Stock Incentive Plan
The following discussion summarizes the federal income tax consequences of the 2014 Stock Incentive Plan based on current provisions of the Internal Revenue Code, which are subject to change. The summary does not cover any foreign, state or local tax consequences of participation in the 2014 Stock Incentive Plan.
Nonqualified Options and SARs
No income is recognized upon the grant of a nonqualified stock option. When an optionee exercises a nonqualified option, the excess of the fair market value of the shares on the date of exercise over the exercise price will be ordinary income to the optionee and will be allowed as a deduction for federal income tax purposes to the Company (or the unconsolidated subsidiary or affiliate employing the participant).
When an optionee disposes of shares acquired by the exercise of the nonqualified option, he or she will recognize long or short term capital gain (loss), depending upon the holding period of the shares. If pursuant to the authority of the Human Resources Committee an optionee transfers an option by gift, the optionee will still have ordinary income upon the exercise of the option by the transferee equal to the excess of the fair market value of the shares on the date of exercise over the exercise price. The transfer of an option by gift may also result in a gift tax liability to the optionee depending on the fair market value of the option at the time of such transfer. If the option is exercisable at the time of the transfer, the gift will occur at the time of transfer. The Internal Revenue Service has ruled that if the option is not exercisable at the time of transfer, the gift will be deemed to occur on the date the option becomes exercisable.
No income is generally recognized upon the grant of a SAR that is to be settled in stock. Except as described below, upon exercise, the grantee of the SAR will generally recognize taxable ordinary income in an amount equal to the amount of cash and fair market value of any shares of Common Stock received upon such exercise.
Incentive Stock Options
No income is recognized upon the grant of an incentive stock option. When an optionee exercises an incentive stock option while employed by the Company or a subsidiary or within the three month (one year for disability) period after termination of employment by reason of retirement or death, no ordinary income will be recognized by the optionee at that time but the excess (if any) of the fair market value of the shares acquired upon such exercise over the exercise price will be an adjustment to taxable income for purposes of the federal alternative minimum tax applicable to individuals. If the shares acquired upon exercise are not disposed of prior to the expiration of one year after the date of transfer and two years after the date of grant of the option, the excess (if any) of the sales proceeds over the aggregate exercise price of such shares will be long term capital gain. The Company will not be entitled to any tax deduction with respect to the amount treated as long term capital gain, and neither will any unconsolidated subsidiary or affiliate employing the participant. If the shares are disposed of prior to the expiration of such periods (a "disqualifying disposition"), the excess of the fair market value of such shares at the time of exercise over the aggregate exercise price (but not more than the gain on the disposition if the disposition is a transaction on which a loss, if realized, would be recognized) will be ordinary income at the time of such disqualifying disposition and the Company (or the unconsolidated subsidiary or affiliate employing the participant) will be entitled to a federal tax deduction in a like amount. If an incentive stock option is exercised by the optionee more than three months (one year for disability) after termination of employment, the tax consequences are the same as described above for nonqualified options.
Restricted stock
Unless a participant makes the election described below, a grant of restricted stock will not result in taxable income to the participant or a deduction for the Company (or the unconsolidated subsidiary or affiliate employing the participant) in the year of grant. The value of such restricted stock will be taxable to a participant as ordinary income in the year in which the restrictions lapse. Alternatively, a participant may elect to treat as income in the year of grant the fair market value of the restricted stock on the date of grant, provided the participant makes the election within 30 days after the date of such grant. If such an election were made, the participant would not be allowed to deduct at a later date the amount included as taxable income if the participant should forfeit the shares of restricted stock. The amount of ordinary income recognized by a participant is deductible by the Company (or the unconsolidated subsidiary or affiliate employing the participant) in the year such income is recognized by the participant. If the election described above is not made, then prior to the lapse of restrictions, dividends paid on the shares subject to such restrictions will be taxable to the participant as additional compensation in the year received, and the Company (or the unconsolidated subsidiary or affiliate employing the participant) will be allowed a corresponding deduction.
Performance shares
When payment is made to a participant in respect of earned performance shares granted under the 2014 Stock Incentive Plan, the participant will have taxable ordinary income in an amount equal to the amount of cash and the fair market value of any shares of Common Stock that such participant receives in payment on such award. The Company will receive a federal income tax deduction in an amount equal to the amount paid to the participant unless the amount is paid by a subsidiary or affiliate that is not part of the Company's consolidated federal return, in which case the subsidiary or affiliate, as the case may be, will receive the deduction.
Performance Units and Restricted Stock Units
Generally, when a participant receives payment with respect to earned performance units or restricted stock units granted under the 2014 Stock Incentive Plan, the amount of cash and the fair market value of the shares received will be ordinary income to such participant, and the Company (or the unconsolidated subsidiary or affiliate employing the participant) will be allowed a corresponding deduction for federal income tax purposes.
Equity Compensation Plan Information
In general, we currently have three compensation plans under which our equity securities are authorized for issuance to employees or directors (not including our tax qualified pension plans): the Principal Financial Group, Inc. 2010 Stock Incentive Plan, the Principal Financial Group, Inc. Employee Stock Purchase Plan and the Principal Financial Group, Inc. 2005 Directors Stock Plan. The following table shows the number of shares of Common Stock issuable upon exercise of options outstanding at December 31, 2013, the weighted average exercise price of those options and the number of shares of Common Stock remaining available for future issuance at December 31, 2013, excluding shares issuable upon exercise of outstanding options. In addition, footnote (5) below provides updated equity plan information as of March 1, 2014.
| ||||||||||
| (a) | (b) | (c) | |||||||
| Plan Category | Number of securities to be issued upon exercise of outstanding options, warrants and rights | Weighted average exercise price of outstanding options, warrants and rights | Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a)) | ||||||
| Equity compensation plans approved by our stockholders(1) | 14,303,948(2) | $41.37(3) | 11,781,992(4) | ||||||
| Equity compensation plans not approved by our stockholders | -0- | n/a | -0- |
PROPOSAL FOUR – 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 30.21. 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, nonbinding 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 FIVE – RATIFICATION OF APPOINTMENT OF INDEPENDENT Proposal Three—Ratification of Appointment ofREGISTERED PUBLIC 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, 2014. 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 many years.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, 20142016 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 20132015 consolidated financial statements.
Audit Fees
The aggregate fees billed by the Company's independent registered public accounting firm in 20132015 and 20122014 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 $8,246,000$10,352,000 in 20132015 and $7,464,000$8,984,000 in 2012.2014.
Audit Related Fees
The aggregate fees billed by the Company's independent registered public accounting firm in 20132015 and 20122014 for professional services rendered in connection with audit 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 totaled approximately $1,113,000$1,397,000 in 20132015 and $1,083,000$1,530,000 in 2012.2014
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 compliance and, in 2012, consultations related to the Foreign Account Tax Compliance Act, totaled approximately $231,000$88,000 in 20132015 and $1,911,000$223,000 in 2012.2014. 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 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 of software licensing and, in 2012, a construction cost evaluation, totaled approximately $10,000$27,000 in 20132015 and $27,500$3,000 in 2012.
Table of Contents2014.
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 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 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 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 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 17, 2014,14, 2016, beneficial ownership of shares of Common Stock by (i) the only shareholders 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 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 | | ||||||
---|---|---|---|---|---|---|---|---|---|---|
Capital Research Global Investors(2) 333 South Hope Street Los Angeles, California 90071 | 20,532,600 | 6.96 | ||||||||
The Vanguard Group(3) 100 Vanguard Boulevard Malvern, Pennsylvania 19355 | 19,659,197 | 6.67 | ||||||||
Nippon Life Insurance Company(4) 3-5-12 Imabashi Chuo-ku Osaka, 541-8501, Japan | 18,137,000 | 6.15 | ||||||||
Betsy J. Bernard | 26,138 | * | ||||||||
Jocelyn Carter-Miller | 26,564 | * | ||||||||
Gary E. Costley | 33,835 | * | ||||||||
Michael T. Dan | 32,202 | * | ||||||||
Dennis H. Ferro | 11,364 | * | ||||||||
C. Daniel Gelatt(5) | 330,543 | * | ||||||||
Sandra L. Helton | 33,782 | * | ||||||||
Richard L. Keyser | 29,600 | * | ||||||||
Luca Maestri | 6,040 | * | ||||||||
Elizabeth E. Tallett | 30,208 | * | ||||||||
Daniel J. Houston(6) | 361,472 | * | ||||||||
Terrance J. Lillis(6) | 209,342 | * | ||||||||
James P. McCaughan | 730,650 | * | ||||||||
Luis Valdés | 154,465 | * | ||||||||
Larry D. Zimpleman | 1,167,863 | * | ||||||||
All Directors and Executive Officers as a group (23 persons) | 4,306,519 | 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 | | ||
| | | | | |
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In addition to beneficial ownership of Common Stock, the Company's Directors and Executive 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 16, 201413, 2016, pursuant to previously awarded stock options, RSUs, performance share units and non transferablenontransferable accounting entry units such as phantom stock units issued pursuant to Company stock 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 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 17, 2014,14, 2016, the Directors and Executive Officers named in the security ownership table hold a pecuniary interest in the following number of units: Ms. Bernard, 3,068;2,535; Ms. Carter-Miller, 3,068;Carter Miller, 2,535; Dr. Costley, 9,970;9,832; Mr. Dan, 11,842;15,133; Mr. Ferro, 17,416;18,966; Dr. Gelatt, 3,068;2,535; Ms. Helton, 3,068;2,535; Mr. Hochschild, 5,404; Mr. Keyser, 3,068;0; Mr. Maestri, 3,068;2,582; Mr. Pickerell, 1,725; Ms. Tallett, 8,169;8,523; Mr. Dunbar, 98,992; Mr. Houston, 147,444;292,292; Mr. Lillis, 101,359;136,697; Mr. McCaughan, 154,208;231,909; Mr. Valdés, 86,937;138,304; and Mr. Zimpleman, 374,276.14,232.
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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, 2013,2015, 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).
APPENDIX A
PRINCIPAL FINANCIAL GROUP, INC.2014 DIRECTORS STOCK PLAN
The purposes of the "PRINCIPAL FINANCIAL GROUP, INC. DIRECTORS STOCK PLAN" (the "Plan") are, except for one report for one Director. Principal discovered that one report for Roger C. Hochschild was inadvertently not timely filed to enable the Company to attract, retain and motivate the best qualified non-employee directors and to enhance a long-term aligning of interests between the non-employee directors and stockholders of the Company by granting equity-based awards as provided herein.
2.1Definitions. Whenever used herein, the following terms shall have the respective meanings set forth below:
1) "Award" means an Option, award of Restricted Stock, an award of Restricted Stock Units, or an Other Stock-Based Award.
2) "Board" means the Board of Directors of the Company.
3) "Code" means the Internal Revenue Code of 1986, as amended.
4) "Common Stock" means the commondisclose restricted stock of the Company, par value $0.01 per share.
5) "Committee" means the Nominating and Governance Committee of the Board or such other committee of the Board as the Board shall designate from time to time.
6) "Company" means Principal Financial Group, Inc., a Delaware corporation, and any successor thereto.
7) "Domestic Partner" means any person qualifying to be treated as a domestic partner of a Participant under the applicable policies, if any, of the Company.
8) "Fair Market Value" means, on any date, the price of the last trade, regular way, in the Common Stock on such date on the New York Stock Exchange or, if at the relevant time, the Common Stock is not listed to trade on the New York Stock Exchange, on such other recognized quotation system on which the trading prices of the Common Stock are then quoted (the "applicable exchange"). In the event that (i) there are no Common Stock transactions on the applicable exchange on any relevant date, Fair Market Value for such date shall mean the closing price on the immediately preceding date on which Common Stock transactions were so reported and (ii) the applicable exchange adopts a trading policy permitting trades after 5 P.M. Eastern Standard Time ("EST"), Fair Market Value shall mean the last trade, regular way, reported on or before 5 P.M. EST (or such earlier or later time as the Committee may establish from time to time) .
9) "Family Member" means, as to a Participant, any (i) child, stepchild, grandchild, parent, stepparent, grandparent, spouse, mother-in-law, father-in-law, son-in-law or daughter-in-law (including adoptive relationships), or Domestic Partner of such Participant, (ii) trusts for the exclusive benefit of one or more such persons and/or the Participant and (iii) other entity owned solely by one or more such persons and/or the Participant.
10) "Net Exercised" shall mean the exercise of an Option or any portion thereof by the delivery to the person exercising such Option of the greatest number of whole shares of Common Stock having a Fair Market Value on the date of exercise not in excess of the difference between the aggregate
Fair Market Value of the shares of Common Stock subject to the Option (or the portion of such Option then being exercised) and the aggregate exercise price for all such shares of Common Stock under the Option (or the portion thereof then being exercised), with any fractional share that would result from such equation to be payable in cash.
11) "Option" means the right to purchase one share of Common Stock at a stated purchase price on the terms specified in Article V of the Plan. The Options are nonstatutory stock options not intended to qualify under Section 422 of the Code.
12) "Other Stock-Based Award" means an award of, or related to, shares of Common Stock other than an Award of Options, Restricted Stock or Restricted Stock Units, asunits granted by the Committee in accordance with the provisionsCompany as director compensation.
Princpal undertakes to prepare Section 16(a) repors on behalf of Article VII hereof.
13) "Participant" means a memberits Directors and Executive Officers. A lack of the Board who is not an officer or employee ofcommunication within the Company or any entity controlling, controlled by, or under common control withcaused the Company, and is not the beneficial owner of a controlling interest in the voting stock of the Company or of any entity that holds a controlling interest in the Company's voting stock.
14) "Period of Restriction" means the period specified by the Committee or established pursuant to the Plan during which a Restricted Stock or Restricted Stock Unit award is subject to forfeiture.
15) "Plan" means the Principal Financial Group, Inc. 2014 Directors Stock Plan, as set forth herein and as amended from time to time.
16) "Prior Plan" means the Principal Financial Group Inc. Directors Stock Plan.
17) "Restricted Stock" means an award of Common Stock made pursuant to Article VI that is forfeitable by the Participant until the completion of a specified period of future service as a member of the Board and/or until otherwise determined by the Committee or in accordance with the terms of the Plan.
18) "Restricted Stock Unit" means a contractual right awarded pursuant to Article VI that entitles the holder to receive shares of Common Stock (or the value thereof in cash) upon the completion of a specified period of future service as a member of the Board and/or at such other time or times determined by the Committee or in accordance with the terms of the Plan.
3.1Rules, Interpretation and Determinations. The Plan shall be administered by the Committee. The Committee shall have full authority to interpret and administer the Plan, to establish, amend and rescind rules for carrying out the Plan, to construe the respective option agreements and to make all other determinations and to take all other actions that it deems necessary or advisable for administering the Plan;provided that, no Committee member may participate in any decision with respect to such member's benefits or entitlements under the Plan, unless such decision applies generally to all non-employee directors. Each determination, interpretation or other action made or taken by the Committee shall be final and binding for all purposes and upon all persons.
3.2Agents and Expenses. The Committee may appoint agents (who may be officers or employees of the Company) to assist in the administration of the Plan and may grant authority to such persons to execute agreements or other documents on its behalf. The Committee may employ such legal counsel, consultants and agents as it may deem desirable for the administration of the Plan and may rely upon any opinion received from any such counsel or consultant and any computation received from any such consultant or agent. All expenses incurred in the administration of the Plan, including, without limitation, for the engagement of any counsel, consultant or agent, shall be paid by the Company.
3.3Maximum Exercise of Discretionary Authority. Notwithstanding anything else in the Plan to the contrary, in no event may the Committee grant Awards pursuant to the exercise of any discretionary authority granted under the Plan (including the right to increase the value of the standard annual award pursuant to
Section 6.1) that would result in the issuance of discretionary Awards to any Participant in any calendar year having a grant date value, as determined in accordance with U.S. generally accepted accounting principles, greater than (i) in the case of any Participant who is serving as the Chairman of the Board of Directors but who is not an employee of the Company, $500,000 and (ii) in the case of any of any other Participant, $230,000 (which is equal to two times the value of the standard annual award stated in Section 6.1 (without the exercise of any discretion by the Committee to increase or decrease such value)).
4.1Number of Shares. Subject to Section 4.3 below, unless the shareholders of the Company approve an increase in such number by a shareholder vote, the maximum number of shares of Common Stock that may be made issuable or distributable under the Plan is 200,000, plus any shares of Common Stock remaining available for grant under the Prior Plans on the effective date of the Plan. Shares of Common Stockreport to be issued under the Plan may consist, in whole or in part, of treasury shares or authorized but unissued shares not reserved for any other purpose.
4.2Canceled, Terminated, or Forfeited Awards. Any shares of Common Stock subject to an Award (as determined under Section 4.1) or any award made or granted under the Prior Plan which for any reason expires without having been exercised, is canceled or terminated or otherwise is settled without the issuance of any Common Stock shall again be available for grant under the Plan. In applying the immediately preceding sentence, if (i) shares otherwise issuable or issued in respect of, or as part of, any Award that are withheld to cover taxes shall not be treated as having been issued under the Plan and (ii) any Options are Net Exercised, only the net number of shares of Common Stock issued in respect of such Options shall be deemed issued under the Plan. In addition, shares of Common Stock tendered to exercise outstanding Options or other Awards or to cover taxes shall also be available for issuance under the Plan (and shall be counted as one share for purposes of Section 4.1), except and unless such shares are tendered more than ten years after the effective date of the Plan.
4.3Adjustment Due to Change in Capitalization. In the event of any Common Stock dividend or split, recapitalization (including, but not limited, to the payment of an extraordinary dividend to the stockholders of the Company), merger, consolidation, combination, spin-off, distribution of assets to stockholders (other than ordinary cash dividends), exchange of shares, or other similar corporate change, the aggregate number of shares of Common Stock available for grant under Section 4.1 or subject to outstanding Awards and the respective exercise prices, if any, applicable to outstanding Awards shall be appropriately adjusted by the Committee, in its discretion, and the Committee's determination shall be conclusive.
ARTICLE V.AWARDS AND TERMS OF OPTIONS
5.1Grants of Options. The Committee shall have the power to grant to any Participant or all Participants Options to purchase such number of shares of Common Stock, and on such terms and conditions, as it shall determine. The Committee may adopt different terms and conditions of each Option, whether granted to different Participants or the same Participant, and whether or not granted at the same time.
5.2Exercise Price. The exercise price for any share of Common Stock subject to an Option shall be not less than the Fair Market Value on the date such Option is granted. Except in the case of an adjustment effected pursuant to Section 4.3 or as otherwise expressly permitted by shareholders, the Committee shall not (i) lower the exercise price of an Option after it is granted, (ii) cancel an Option when the exercise price exceeds the Fair Market Value of a share of Common Stock in exchange for cash or another Award, including, without limitation, another Option, or (iii) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal U.S. national securities exchange on which the shares are listed. In no event shall ordinary dividends be payable or credited in respect of any shares subject to any outstanding Option.
5.3Period of Exercisability. The Committee shall determine the date or dates at which Options become exercisable. Each Option shall, if not previously exercised in accordance with the terms of the Plan, in all events expire on the tenth (10th) anniversary of the date of the grant thereof. If a Participant shall cease to provide services to the Company, such Participant or, in the case of death, the Participant's estate or beneficiary, may exercise any Option exercisable by the Participant at the date his or her service terminated until the earlier of
(A) five (5) years from the date the Participant ceased to provide services to the Company and (B) the tenth (10th) anniversary of the date the Option was granted.
5.4Procedure for Exercise. The Committee shall establish procedures governing the exercise of Options. No shares shall be delivered pursuant to any exercise of any Options unless arrangements satisfactory to the Committee have been made to assure full payment of the exercise price therefor. Without limiting the generality of the foregoing, payment of the exercise price may be made (i) in cash or its equivalent; (ii) by exchanging shares of Common Stock (which are not the subject of any pledge or other security interest), subject to such terms and conditions as the Committee shall establish; (iii) by any combination of the foregoing;provided that the combined value of all cash and cash equivalents paid and the Fair Market Value of any such Common Stock tendered to the Company, valued as of the date of such tender, is at least equal to such exercise price; or (iv) in accordance with any other procedure or arrangement approved by the Committee, except that, in no event shall the Company loan a Participant funds or otherwise extend credit to a Participant to facilitate such Participant's exercise of any of his or her Options. Additionally, to the extent authorized by the Committee (whether at or after grant), Options may be Net Exercised subject to such terms and conditions as the Committee may from time to time impose.
6.1Standard Grants of Restricted Stock Units. Unless otherwise determined by the Committee, on the date of each annual meeting of shareholders occurring during the term of the Plan (including, without limitation, the meeting occurring in 2014), each director in office immediately following such shareholders' meeting shall be granted the greatest whole number of Restricted Stock Units having a value not in excess of $115,000 (or such greater or lesser amount as the Committee shall determine from time to time). The number of Restricted Stock Units shall be determined using the same methodology as used to convert value to Restricted Stock Units for employees under the Principal Financial Group, Inc. 2014 Stock Incentive Plan, as may be amended, from time to time. If a person becomes a member of the Board after the effective date of the Plan other than on the date of an annual meeting of shareholders, on or after the date of such Participant's election to the Board, such Participant shall be granted a number of Restricted Stock Units as determined by the Committee in its sole discretion.
6.2Discretionary Grants of Restricted Stock or Restricted Stock Units. Without limiting the generality of Section 6.1, the Committee may also grant Restricted Stock or Restricted Stock Units to any Participant or all Participants at such times, with respect to such number of shares of Common Stock and on such terms and conditions (including, in the case of any grant made in exchange for foregoing the receipt of fees otherwise payable in cash, a discount in the value of the Common Stock subject to the award to reflect the applicable restrictions on the Award) not inconsistent with the Plan as the Committee shall determine.
6.3Agreements; Restrictions on Certificates. The terms and conditions of each grant of Restricted Stock or Restricted Stock Units shall be evidenced in writing. If Restricted Stock is evidenced by the issuance of stock certificates, the Committee shall require that such stock certificates be held in the custody of the Secretary of the Company until the Period of Restriction lapses, and that, as a condition of such Restricted Stock award, the Participant shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such Award.
6.4Restrictions on Transferability. Except as provided in Section 9.2, no shares of Restricted Stock or Restricted Stock Units may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the lapse of the Period of Restriction. The Committee shall establish the Period of Restriction and the date or dates at which such Period of Restriction shall lapse, in whole or in part, with respect to any award made pursuant to Section 6.2. Unless otherwise determined by the Committee at the time of grant, the Period of Restriction with respect to any award of Restricted Stock Units granted under Section 6.1 shall lapse on the scheduled date of the first annual meeting of shareholders scheduled to occur after the date such Restricted Stock Units are granted. Notwithstanding the foregoing, unless otherwise determined by the Committee, the Period of Restriction applicable to any Restricted Stock or Restricted Stock Units shall not lapse, in whole or in part, at any time after the Participant has ceased to provide services to the Company.
6.5Distributions in Respect of Restricted Stock Units. Unless the Committee shall otherwise determine at or prior to the time of grant, any Restricted Stock Units awarded under Section 6.1 shall be distributed to a Participant (regardless of when such Restricted Stock Units become vested and nonforfeitable) within 90inadvertently filed two business days after the later of (1) the date the Participant's services as member of the Board terminate or (2) the date specified in a deferral election made pursuant totwo-day filing requirement for Section 9.10. At the time the Committee makes any grant of Restricted Stock Units pursuant to Section 6.2, the Committee shall specify when such Restricted Stock Units shall be distributed, taking into account the requirements of Section 409A.16(a) reports.
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6.6Rights as a Shareholder. Unless otherwise determined by the Committee at the time of grant and subject to Section 6.7, Participants holding shares of Restricted Stock may exercise full voting rights and other rights as a shareholder with respect to those shares during the Period of Restriction. A Participant receiving Restricted Stock Units shall not have any rights as a shareholder prior to the actual issuance of Common Stock in respect thereof in accordance with Section 6.5, except that the Participant shall be entitled to payment of dividend equivalents on such rights equal to the dividends that would have been payable (or accumulated, pursuant to Section 6.6) had the corresponding equity rights been actual shares of Restricted Stock.
6.7Dividends and Dividends Equivalents. Unless otherwise determined by the Committee at the time of grant, (i) any cash dividends paid on shares of Restricted Stock will not be paid currently, but rather will be credited to an account established for the Participant and invested in additional shares of Common Stock based on the Fair Market Value on the distribution date for such dividends, (ii) any distributions paid on Restricted Stock in property other than Common Stock shall be converted into cash, which will be treated in the same manner as any cash dividends, (iii) any dividends or distributions paid on Restricted Stock in shares of Common Stock will be held for the benefit of the Participant and (iv) any additional shares credited to or held for a Participant pursuant to this Section 6.7 in respect of any such dividends or distributions on Restricted Stock shall become vested and nonforfeitable upon the same terms and conditions as are applicable to the shares underlying the Award in respect of which they were paid. With respect to any grant of Restricted Stock Units, there will be credited to an account established for the Participant dividend equivalents in respect of the dividends and distributions paid on that number of outstanding shares of Common Stock corresponding to the shares subject to such Award and such account will be administered in substantially the same manner as the account established for a Participant hereunder in respect of dividends and distributions paid on Restricted Stock (including, without limitation, the condition pertaining to vesting and forfeiture).
6.8Termination of Service. Unless otherwise determined by the Committee at or after the time of grant, in the event the service of the Participant as member of the Board shall terminate for any reason, any Restricted Stock or Restricted Stock Units awarded to such Participant as to which the Period of Restriction has not lapsed shall be forfeited.
ARTICLE VII.OTHER STOCK-BASED AWARDS
7.1Other Stock Based Awards. The Committee may make Other Stock Based Awards, including, but not limited to, the outright grant of Common Stock in satisfaction of obligations of the Company under another compensatory plan, program or arrangement, modified awards intended to comply with or structured in accordance with the provisions of applicable non-U.S. law or practice, or the sale of Common Stock, in such amounts and subject to such terms and conditions as the Committee shall determine. Each such Other-Stock Based Award shall be evidenced in writing and specify the terms and conditions applicable thereto. Any such Other Stock-Based Award may entail the transfer of actual shares of Common Stock or the payment of the value of such Award in cash based upon the value of a specified number of shares of Common Stock, or any combination of the foregoing, as determined by the Committee. The terms of any Other Stock-Based Award need not be uniform in application to all (or any class of) Participants, and each Other Stock-Based Award granted to any Participant (whether or not at the same time) may have different terms.
7.2Termination of Employment or Service. In addition to any other terms and conditions that may be specified by the Committee, each Other Stock Based Award shall specify the impact of termination of services as a member of the Board upon the rights of a Participant in respect of such Award.
ARTICLE VIII.TERMINATION, MODIFICATION AND AMENDMENT
The Board may, at any time and from time to time amend, modify, suspend, or terminate this Plan, in whole or in part, without notice to or the consent of any Participant;provided,however,that any amendment which would (i) increase the number of shares available for issuance under the Plan, (ii) lower the exercise price of an Option after it is granted, cancel an Option when the exercise price exceeds the Fair Market Value of a share of Common Stock in exchange for cash or another Award, including, without limitation, another Option, or take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal U.S. national securities exchange on which the Shares are listed, (iii) extend the maximum term for Options granted hereunder or (iv) otherwise amend the Plan in a material fashion that would require the approval of shareholders under the applicable rules and regulations of any exchange or automated quotation system on which the Common Stock is listed to trade shall be subject to the approval of the Company's shareholders. No amendment, modification, or termination of the Plan shall in any manner adversely affect any Award theretofore granted under the Plan, without the consent of the Participant.
9.1No Right to Remain as a Director. The Plan shall not impose any obligations on the Company to retain any Participant as a Director nor shall it impose any obligation on the part of any Participant to remain in service to the Company.
9.2Transferability. No Awards granted under the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than in accordance with Section 9.3 below, by will or by the laws of descent and distribution; provided that the Committee may, in the appropriate award agreement or otherwise, permit transfers of Awards to Family Members (including, without limitation, transfers effected by a domestic relations order) subject to such terms and conditions as the Committee shall determine, including requiring that such Award be transferred without the receipt of consideration by the Participant.
9.3Beneficiary Designation. Each Participant under the Plan may from time to time name any beneficiary or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paid or by whom any right under the Plan is to be exercised in case of the Participant's death. Each designation will revoke all prior designations by the same Participant with respect to all Awards previously granted, shall be in a form prescribed by the Committee, and will be effective only when received by the Committee in writing during the Participant's lifetime. In the absence of any such effective designation, benefits remaining unpaid at the Participant's death shall be paid to or exercised by the Participant's surviving spouse, if any, or otherwise to or by the Participant's estate. Except as otherwise expressly provided herein, nothing in this Plan is intended or may be construed to give any person other than Participants any rights or remedies under this Plan.
9.4Rights as a Stockholder. No Participant nor any beneficiary thereof shall have any rights as a stockholder with respect to any shares of Common Stock covered by any Award until such person shall have become the holder of record of such shares.
9.5Requirements of Law. The granting of Awards and the issuance of shares of Common Stock shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
9.6Term of Plan. The Plan shall be effective upon the date, if any, on which it is approved by the Company's shareholders. The Plan shall continue in effect, unless sooner terminated pursuant to Article VIII above, until the tenth anniversary of the date of such shareholder approval.
9.7Governing Law. The Plan, and all agreements hereunder, shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to principles of conflict of laws.
9.8No Constraint on Corporate Action. Except as provided in Article VIII above, nothing contained in this Plan shall be construed to prevent the Company, or any affiliate, from taking any corporate action (including, but not limited to, the Company's right or power to make adjustments, reclassifications, reorganizations or
changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets) which is deemed by it to be appropriate, or in its best interest, whether or not such action would have an adverse effect on this Plan, or any awards made under this Plan. No director, beneficiary, or other person shall have any claim against the Company, or any of its affiliates, as a result of any such action.
9.9Indemnification. Each member of the Board and the Committee shall be indemnified and held harmless by the Company (or, if applicable, any affiliate of the Company) against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member of the Board or the Committee in connection with or resulting from any claim, action, suit, or proceeding to which such member may be made a party or in which such member may be involved by reason of any action taken or failure to act under the Plan (in the absence of bad faith) and against and from any and all amounts paid by such member in settlement thereof, with the Company's (or, if appropriate, an affiliate's) approval, or paid by such member in satisfaction of any judgment in any such action, suit, or proceeding against such member, provided that such member shall give the Company (or, if applicable, an affiliate) an opportunity, at its own expense, to handle and defend the same before such member undertakes to handle and defend it individually. The foregoing right of indemnification shall not be exclusive and shall be independent of any other rights of indemnification to which any such person may be entitled under the Company's Certificate of Incorporation or By-Laws, by contract, as a matter of law, or otherwise.
9.10Deferral of Payment. At the time any Award is granted (or such earlier time as the Committee may require), the Committee may permit a Participant to elect, upon such terms and conditions as the Committee may establish (including, without limitation, conditions designed to satisfy the requirements of Section 409A of the Code) to defer receipt of shares of Common Stock that would otherwise be issued in connection with an Award.
9.11Headings and Captions. The headings and captions herein are provided for reference and convenience only, shall not be considered part of the Plan, and shall not be employed in the construction of the Plan.
APPENDIX B
PRINCIPAL FINANCIAL GROUP, INC.2014 STOCK INCENTIVE PLAN
The purpose of the "PRINCIPAL FINANCIAL GROUP, INC. 2014 STOCK INCENTIVE PLAN (the "Plan") is to foster and promote the long-term financial success of the Company and its subsidiaries and materially increase shareholder value by (a) motivating superior performance by means of performance-related incentives, (b) encouraging and providing for the acquisition of an ownership interest in the Company by the Company's and its Subsidiaries' employees and agents, and (c) enabling the Company to attract and retain the services of outstanding employees upon whose judgment, interest, and special effort the successful conduct of its operations is largely dependent.
(a) Definitions. Whenever used herein, the following terms shall have the respective meanings set forth below:
(1) "Agent" means each insurance agent (whether or not a statutory employee) and each other individual providing personal service to the Company or any Subsidiary who, in either case, is not an Employee.
(2) "Approved Retirement" means termination of a Participant's employment or service (i) on or after the normal retirement date or any early retirement date established under any defined benefit pension plan maintained by the Company or a Subsidiary and in which the Participant participates; (ii) for those Participants who are either U.S. taxpayers or whose principal place of employment is in the United States and who do not participate in a defined benefit plan maintained by the Company or a Subsidiary, on or after attaining age 57 and having completed at least 10 years of service; or (iii) for those Participants who are not U.S. taxpayers and whose principal place of employment is outside the United States, and who do not participate in a defined benefit plan maintained by the Company or a Subsidiary, the later of: attaining age 57 and having completed at least 10 years of service, or the date that the Participant satisfies all eligibility and other requirements under a national or other government sponsored public social security system covering such Participant to qualify for immediate commencement of retirement income payments under such national or other government sponsored public social security system, as determined by the Committee, for each non-U.S. jurisdiction (iv) with the approval of the Committee (which may be given at or after grant), on or after attaining age 50 and completing such period of service as the Committee shall determine from time to time.
(3) "Award" means an Option, SAR, award of Restricted Stock or Performance Shares, an award of Restricted Stock Units or Performance Units or an Other Stock-Based Award.
(4) "Beneficial Owner" means such term as defined in Rule 13d-3 under the Exchange Act.
(5) "Board" means the Board of Directors of the Company.
(6) "Cause" means (i) dishonesty, fraud or misrepresentation, (ii) the Participant's engaging in conduct that is injurious to the Company or any Subsidiary in any way, including, but not limited to, by way of damage to its reputation or standing in the industry, (iii) the Participant's having been convicted of, or entered a plea ofnolo contendere to, a crime that constitutes a felony; (iv) the breach by the Participant of any written covenant or agreement with the Company or any Subsidiary not to disclose or misuse any information pertaining to, or misuse any property of, the Company or any Subsidiary or not to compete or interfere with the Company or any Subsidiary or (v) a violation by the Participant of any policy of the Company or any Subsidiary.
(7) "Change of Control" means the occurrence of any one or more of the following:
(i) any SEC Person becomes the Beneficial Owner of 40% or more of the Common Stock or of Voting Securities representing 40% or more of the combined voting power of all Voting Securities of the Company (such an SEC Person, a "40% Owner"); or
(ii) the Incumbent Directors cease for any reason to constitute at least a majority of the Board; or
(iii) consummation of a merger, reorganization, consolidation, or similar transaction (any of the foregoing, a "Reorganization Transaction") where the SEC Persons who were the direct or indirect owners of the outstanding Common Stock and Voting Securities of the Company immediately before such Reorganization Transaction are not or do not become, immediately after the consummation of such Reorganization Transaction, the direct or indirect owners of 60% of each of (i) the then-outstanding common stock of the Surviving Corporation and (ii) the combined voting power of the then-outstanding Voting Securities of the Surviving Corporation, in substantially the same respective proportions as such SEC Persons' ownership of the Common Stock and Voting Securities of the Company immediately before such Reorganization Transaction; or
(iv) approval by the Company's stockholders and consummation of a plan or agreement for the sale or other disposition of all or substantially all of the consolidated assets of the Company or a plan of liquidation of the Company.
(8) "Change of Control Price" means the highest price per share of Common Stock offered in conjunction with any transaction resulting in a Change of Control (as determined in good faith by the Committee if any part of the offered price is payable other than in cash) or, in the case of a Change of Control occurring solely by reason of a change in the composition of the Board, the highest Fair Market Value of the Common Stock on any of the 30 trading days immediately preceding the date on which a Change of Control occurs.
(9) "Code" means the Internal Revenue Code of 1986, as amended.
(10) "Committee" means the Human Resources Committee of the Board or such other committee of the Board as the Board shall designate from time to time.
(11) "Common Stock" means the common stock of the Company, par value $0.01 per share.
(12) "Company" means Principal Financial Group, Inc., a Delaware corporation, and any successor thereto.
(13) "Disability" means, with respect to any Participant, long-term disability as defined under any long-term disability plan maintained by the Company or a Subsidiary in which the Participant participates. In the event of any question as to whether a Participant has a Disability, the plan administrator of the relevant long-term disability plan shall determine whether a disability exists, in accordance with such plan.
(14) "Domestic Partner" means any person qualifying to be treated as a domestic partner of a Participant under the applicable policies, if any, of the Company or Subsidiary which employs the Participant.
(15) "Employee" means any employee (including each officer) of the Company or any Subsidiary.
(16) "Exchange Act" means the Securities Exchange Act of 1934, as amended.
(17) "Executive Officer" means any officer of the Company or any Subsidiary who is subject to the reporting requirements under Section 16(b) of the Exchange Act.
(18) "Fair Market Value" means, on any date, the price of the last trade, regular way, in the Common Stock on such date on the New York Stock Exchange or, if at the relevant time, the Common Stock is not listed to trade on the New York Stock Exchange, on such other recognized quotation system on which the trading prices of the Common Stock are then quoted (the "applicable exchange"). In the event that (i) there are no Common Stock
transactions on the applicable exchange on any relevant date, Fair Market Value for such date shall mean the closing price on the immediately preceding date on which Common Stock transactions were so reported and (ii) the applicable exchange adopts a trading policy permitting trades after 5 P.M. Eastern Standard Time ("EST"), Fair Market Value shall mean the last trade, regular way, reported on or before 5 P.M. EST (or such earlier or later time as the Committee may establish from time to time).
(19) "Family Member" means, as to a Participant, any (i) child, stepchild, grandchild, parent, stepparent, grandparent, spouse, mother-in-law, father-in-law, son-in-law or daughter-in-law (including adoptive relationships), or Domestic Partner of such Participant, (ii) trusts for the exclusive benefit of one or more such persons and/or the Participant and (iii) other entity owned solely by one or more such persons and/or the Participant.
(20) "40% Owner" shall have the meaning ascribed thereto in the definition of Change of Control.
(21) "Incentive Stock Option" (ISO) means an option within the meaning of Section 422 of the Code.
(22) "Incumbent Directors" means, as of any date, the individuals then serving as members of the Board who were also members of the Board as of the date two years prior to the date of determination;provided that any member appointed or elected as a member of the Board after such prior date, but whose election, or nomination for election, was approved by a vote or written consent of at least a majority of the directors then comprising the Incumbent Directors shall also be considered an Incumbent Director unless such person's election, or nominated for election, to the Board was as a result of, or in connection with, a proxy contest or a Reorganization Transaction.
(23) "Net Exercised" shall mean the exercise of an Option or any portion thereof by the delivery to the person exercising such Option of the greatest number of whole shares of Common Stock having a Fair Market Value on the date of exercise not in excess of the difference between the aggregate Fair Market Value of the shares of Common Stock subject to the Option (or the portion of such Option then being exercised) and the aggregate exercise price for all such shares of Common Stock under the Option (or the portion thereof then being exercised), with any fractional share that would result from such equation to be payable in cash.
(24) "Nonstatutory Stock Option" (NSO) means an option which is not an Incentive Stock Option within the meaning of Section 422 of the Code.
(25) "Option" means the right to purchase Common Stock at a stated price for a specified period of time. For purposes of the Plan, an Option may be either (i) an "Incentive Stock Option" (ISO) within the meaning of Section 422 of the Code or (ii) an option which is not an Incentive Stock Option (a "Nonstatutory Stock Option" (NSO)).
(26) "Other Stock-Based Award" means an award of, or related to, shares of Common Stock other than an Award of Options, SARs, Restricted Stock, Performance Shares, Restricted Stock Units or Performance Units, as granted by the Committee in accordance with the provisions of Section 9 hereof.
(27) "Participant" means any Employee or Agent designated by the affirmative action of the Committee (or its delegate) to participate in the Plan.
(28) "Performance Criteria" means the objectives established by the Committee for a Performance Period pursuant to Section 7(c) for the purpose of determining the extent to which an award of Performance Shares or Performance Units has been earned.
(29) "Performance Period" means the period selected by the Committee during which performance is measured for the purpose of determining the extent to which an award of Performance Shares or Performance Units has been earned.
(30) "Performance Share" means an Award granted pursuant to Section 7 of the Plan of a contractual right to receive one share of Common Stock (or the Fair Market Value thereof in cash or any combination of cash and Common Stock, as determined by the Committee), or a fraction or multiple thereof, upon the achievement, in whole or in part, of the applicable Performance Criteria.
(31) "Performance Unit" means an Award granted pursuant to Section 7 of the Plan of a contractual right to receive a fixed or variable dollar denominated unit (or a unit denominated in the Participant's local currency), or a fraction or multiple thereof, upon the achievement, in whole or in part, of the applicable Performance Criteria. The Committee shall determine whether the earned portion of any such Performance Units shall be payable in cash, Common Stock or any combination thereof.
(32) "Period of Restriction" means the period specified by the Committee or established pursuant to the Plan during which a Restricted Stock or Restricted Stock Unit award is subject to forfeiture.
(33) "Prior Plan" means the Principal Financial Group, Inc., 2005 Stock Incentive Plan and the 2010 Amended and Restated Stock Incentive Plan.
(34) "Pro-Ration Fraction" means a fraction not greater than one, the numerator of which is (A) the number of days during the Retirement Year or Performance Period, as applicable to the Award in question, during which the Participant was employed and (B) the denominator of which is 365.
(35) "Reorganization Transaction" shall have the meaning ascribed thereto in the definition of Change of Control.
(36) "Resignation" shall have the meaning ascribed thereto in Section 5(f)(v).
(37) "Restricted Stock" means an award of Stock made pursuant to Section 6 that is forfeitable by the Participant until the completion of a specified period of future service, the achievement of pre-established performance objectives and/or until otherwise determined by the Committee or in accordance with the terms of the Plan.
(38) "Restricted Stock Unit" means a contractual right awarded pursuant to Section 6 that entitles the holder to receive shares of Common Stock (or the value thereof in cash) upon the completion of a specified period of future service or the achievement of pre-established performance objectives and/or at such other time or times determined by the Committee or in accordance with the terms of the Plan.
(39) "SAR" means a stock appreciation right granted under Section 8 of the Plan in respect of one or more shares of Common Stock that entitles the holder thereof to receive, in Common Stock (unless otherwise determined by the Committee at the time of grant), an amount per share of Common Stock equal to the excess, if any, of the Fair Market Value on the date the SAR is exercised over the Fair Market Value on the date the SAR is granted.
(40) "SEC Person" means any person (as such term is defined in Section 3(a)(9) of the Exchange Act) or group (as such term is used in Rule 13d-5 under the Exchange Act), other than an affiliate or any employee benefit plan (or any related trust) of the Company or any of its affiliates.
(41) "Subsidiary" means (i) any corporation in which the Company owns, directly or indirectly, at least 50% of the total combined voting power of all classes of stock of such corporation, (ii) any partnership or limited liability company in which the Company owns, directly or indirectly, at least 50% of the capital interests or profits interest of such partnership or limited liability company and (iii) any other business entity in which the Company owns at least 50% of the equity interests thereof,provided that, in any such case, the Company is in effective control of such corporation, partnership, limited liability company or other entity.
(42) "Surviving Corporation" means the corporation resulting from a Reorganization Transaction or, if securities representing at least 50% of the aggregate voting power of such resulting corporation are directly or indirectly owned by another corporation, such other corporation.
(43) "Voting Securities" means, with respect to any corporation, securities of such corporation that are entitled to vote generally in the election of directors of such corporation.
SECTION 3.POWERS OF THE COMMITTEE; GENERAL TERMS OF AWARDS
(a)Power to Grant. The Committee shall determine those Employees and/or Agents to whom an Award shall be granted Questions and Answers About the terms and conditions of any and all such Awards. The Committee may establish different terms and conditions for different Awards and different Participants and for the same Participant for each Award such Participant may receive, whether or not granted at different times.
(b)Rules, Interpretations and Determinations. The Plan shall be administered by the Committee. The Committee shall have full authority to interpret and administer the Plan, to establish, amend, and rescind rules and regulations relating to the Plan, to provide for conditions deemed necessary or advisable to protect the interests of the Company, to construe the terms of any Award or any document evidencing the grant of such Award and to make all other determinations necessary or advisable for the administration and interpretation of the Plan in order to carry out its provisions and purposes. Unless otherwise expressly provided hereunder, any power, discretion or authority conveyed to or reserved to the Committee may be exercised by it in its sole and absolute discretion. Determinations, interpretations, or other actions made or taken by the Committee shall be final, binding, and conclusive for all purposes and upon all persons.
(c)Delegation of Authority. The Committee may delegate to the Company's Chief Executive Officer and/or to such other officer(s) of the Company the power and authority to make and/or administer Awards under the Plan with respect to individuals who are below the position of Senior Vice President (or any analogous title), pursuant to such conditions and limitations as the Committee may establish;provided that only the Committee or the Board may select, and grant Awards to, Executive Officers or exercise any other discretionary authority under the Plan in respect of Awards granted to such Executive Officers. Unless the Committee shall otherwise specify, any delegate shall have the authority and right to exercise (within the scope of such person's delegated authority) all of the same powers and discretion that would otherwise be available to the Committee pursuant to the terms hereof. The Committee may also appoint agents (who may be officers or employees of the Company) to assist in the administration of the Plan and may grant authority to such persons to execute agreements or other documents on its behalf. All expenses incurred in the administration of the Plan, including, without limitation, for the engagement of any counsel, consultant or agent, shall be paid by the Company.
(d)Restrictive Covenants and Other Conditions. Without limiting the generality of the foregoing, the Committee may condition the grant of any Award under the Plan upon the Participant to whom such Award would be granted agreeing in writing to certain conditions (such as restrictions on the ability to transfer the underlying shares of Common Stock) or covenants in favor of the Company and/or one or more Subsidiaries (including, without limitation, covenants not to compete, not to solicit employees and customers and not to disclose confidential information, that may have effect following the termination of the Participant's employment or service with the Company and its Subsidiaries and after the Common Stock subject to the Award has been transferred to the Participant), including, without limitation, the requirement that the Participant disgorge any profit, gain or other benefit received in respect of the Award prior to any breach of any such covenant.
(e)Participants Based Outside the United States. To conform with the provisions of local laws and regulations, or with local compensation practices and policies, in foreign countries in which the Company or any of its Subsidiaries operate, but subject to the limitations set forth herein regarding the maximum number of shares issuable hereunder and the maximum award to any single Participant, the Committee may (i) modify the terms and conditions of Awards granted to Participants employed outside the United States ("Non-US Awards"), (ii) establish subplans with modified exercise procedures and such other modifications as may be necessary or advisable under the circumstances ("Subplans"), and (iii) take any action which it deems advisable to obtain, comply with or otherwise reflect any necessary governmental regulatory procedures, exemptions or approvals with respect to the Plan. The Committee's decision to grant Non-US Awards or to establish Subplans is entirely voluntary, and at the complete discretion of the Committee. The Committee may amend, modify or terminate any Subplans at any time, and such amendment, modification or termination may be made without prior notice to the Participants. The Company, Subsidiaries, and members of the Committee shall not incur any liability of any kind to any Participant as a result of any change, amendment or termination of any Subplan at any time. The benefits and rights provided under any Subplan or by any Non-US Award (i) are wholly discretionary and, although provided by either the Company or a Subsidiary, do not constitute regular or periodic payments and (ii) are not to be considered part of the Participant's salary or compensation under the Participant's employment with the Participant's local employer for purposes of calculating any severance, resignation, redundancy or other end of
service payments, vacation, bonuses, long-term service awards, indemnification, pension or retirement benefits, or any other payments, benefits or rights of any kind. If a Subplan is terminated, the Committee may direct the payment of Non-US Awards (or direct the deferral of payments whose amount shall be determined) prior to the dates on which payments would otherwise have been made, and, in the Committee's discretion, such payments may be made in a lump sum or in installments.
(f)Maximum Individual Grants. Subject to adjustment as provided in Section 4(d), no Participant shall be granted (i) Options or SARs (with tandem Options and SARs being counted only once with respect to this limit) during any 36-month period with respect to more than 3,000,000 shares of Common Stock or (ii) during any 12-month period Restricted Stock, Restricted Stock Units, Performance Shares and/or Other Stock-Based Awards that are intended to comply with the performance-based exception under Code Section 162(m) and that are denominated in shares of Common Stock, with respect to more than 250,000 shares of Common Stock, when measured upon achievement of the performance objectives at targeted levels of performance, it being understood that any such grants may provide that, for performance above targeted levels, up to twice such number of shares may be payable. In addition to the foregoing, the maximum dollar value payable to any participant with respect to Performance Units and/or Other Stock-Based Awards granted in any 12-month period that are intended to comply with the performance-based exception under Code Section 162(m) and that are valued with reference to cash or property other than shares of Common Stock is $10,000,000.
(g)Dividends and Dividends Equivalents. Unless otherwise determined by the Committee at the time of grant, to the extent that shares of Common Stock are issued at the time of grant of any Award under the Plan (other than Options and SARs), the Participant shall be entitled to receive all dividends and other distributions paid with respect to those shares, provided that if any such dividends or distributions are paid in shares of Common Stock, such shares shall be subject to the same forfeiture restrictions and restrictions on transferability as apply to the shares subject to such Award on which such dividends or distributions were paid. To the extent that shares of Common Stock are not issued at the time of the grant of any Award, the Committee shall determine whether, and to what extent, the Participant shall be entitled to receive the payment of dividend equivalents in respect of that number of outstanding shares of Common Stock corresponding to the shares subject to such Award. Any additional shares credited in respect of any dividends or dividend equivalents payable in respect of any shares of Common Stock subject to any Award shall become vested and nonforfeitable upon the same terms and conditions (including the achievement of any applicable Performance Criteria) as are applicable to the shares underlying the Award in respect of which they are payable (unless the Committee shall determine otherwise with respect to any Award that will become earned and vested solely upon the passage of time and the continued performance of services.Annual Meeting
SECTION 4.COMMON STOCK SUBJECT TO PLAN
Why didn't I receive a copy of the paper proxy materials? |
(a)Number. SubjectThe Securities and Exchange Commission ("SEC") rules allow companies to Section 4(d) below, unless thedeliver 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 Company approve an increase in such numberproxy materials free of charge by a shareholder vote,following the maximum number of shares of Common Stock that may be made issuable or distributable under the Plan is 7,800,000, plus any shares of Common Stock remaining available for grant under the Prior Plans on the effective date of the Plan. After the effective date of the Plan, no awards may be granted under any Prior Plan. The number of shares of Common Stock subject to an Award shall be counted against such limit as one share for each share issued or issuable,instructions provided that when a SAR is granted in tandem with an Option, so that only one may be exercised with the other terminating upon such exercise, the number of shares of Common Stock subject to the tandem Option and SAR award shall only be taken into account once (and not as to both awards) for purposes of this limit (and for purposes of the provisions of Section 4(b) below). Without limiting the generality of the foregoing, the maximum number of shares as to which Incentive Stock Options may be granted shall not exceed 10 million shares. The shares to be delivered under the Plan may consist, in whole or in part, of treasury Common Stock or authorized but unissued Common Stock, not reserved for any other purpose.
(b)Canceled or Terminated Awards. Any shares of Common Stock subject to an Award (as determined under Section 4(a)) or any award made or granted under the Prior Plan which for any reason expires without having been exercised, is canceled or terminated or otherwise is settled without the issuance of any Common Stock shall again be available for grant under the Plans. In applying the immediately preceding sentence, if (i) shares otherwise issuable or issued in respect of, or as part of, any Award that are withheld to cover taxes shall not be treated as having been issued under the Plan and (ii) any SARs are settled in shares of
Common Stock or any Options are Net Exercised, only the net number of shares of Common Stock issued in respect of such SARs or Options shall be deemed issued under the Plan. In addition, shares of Common Stock tendered to exercise outstanding Options or other Awards or to cover taxes shall also be available for issuance under the Plan (and shall be counted as one share for purposes of Section 4(a)), except and unless such shares are tendered more than ten years after the effective date of the Plan.
(c)Repurchased Shares. In addition to the shares otherwise authorized for issuance hereunder, any shares of Common Stock that are acquired by the Company through the application of the cash proceeds received in connection with the exercise of Options shall also be available for issuance under the Plan in the same manner as though such shares had been tendered to exercise the corresponding Options.
(d)Adjustment Due to Change in Capitalization. In the eventnotice of any Common Stock dividend or Common Stock split, recapitalization (including, but not limited to, the paymentInternet availability of an extraordinary dividend to the shareholders of the Company), merger, consolidation, combination, spin-off, distribution of assets to shareholders (other than ordinary cash dividends), exchange of shares, or other similar corporate change, the aggregate number of shares of Common Stock available for grant under Section 4(a) or subject to outstanding Awards,, the respective exercise prices or base prices, if any, applicable to outstanding Awards and individual share award limits set forth in Section 3(f) will be appropriately adjusted by the Committee, in its discretion, and the Committee's determination shall be conclusive.
(e)Assumption of Options and Other Equity-Based Awards. In the event that there is a merger, stock purchase or other transaction whereby the Company or any of its Subsidiaries acquires another business or any portion thereof, and that pursuant to the arrangements governing such acquisition, the Company agrees to provide options and/or other awards in respect of the Common Stock upon the assumption or in substitution of existing equity-based awards for other securities held by employees and other service providers of the acquired business, the shares of Common Stock subject to such assumed or substituted awards shall not be counted against the limits set forth under Section 4(a) (and no shares related to any such assumed or substituted awards shall be added to the number of awards issuable under this Plan pursuant to Section 4(b)), and none of the provisions of the Plan that would otherwise limit or constrain the ability of the Company to make such assumption or substitution (such as the provisions hereof that require the issuance of Options with an exercise price at least equal to the Fair Market Value on the date of grant) shall apply to the awards issued in substitution of the awards granted in respect of the employees and service providers of such acquired business.proxy materials.
Why did I receive notice of and access to this proxy statement? |
(a) Options mayThe Board of Directors ("Board") is soliciting proxies to be grantedvoted at the annual meeting of shareholders to Participants in accordance with the termsbe 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 Plan at such timemeeting ("Annual Meeting"). When the Board asks for your proxy, it must send or timesprovide 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 shall be determined byyour proxy in a written document, that document is also called a proxy or a proxy card. Principal has designated three of the Committee. Options granted underCompany's officers to act as proxies for the Plan may be2016 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 number of Options,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 be granted to a Participant, except that Incentive Stock Options may only be granted to Employees. The terms and conditions of each Option grant, including, but not limited to, the type of Option granted, the exercise price, the duration of the Option, the number of shares of Common Stock to which the Option pertains, shall be evidenced in writing. Each such Option grant may also contain such other terms and conditions not inconsistent with the provisions of the Plan as the Committee shall determine.their best judgment.
(b)Exercise Price. Nonstatutory Stock Options and Incentive Stock Options granted pursuant to the Plan shall have an exercise price no less than the Fair Market Value of a share of Common Stock on the date on which the Option is granted. Except in the case of an adjustment effected pursuant to Section 4(d) , the Committee shall not (i) lower the exercise price of an Option after it is granted, (ii) cancel an Option when the exercise price exceeds the Fair Market Value of a share of Common Stock in exchange for case or another Award (other than in connection with a Change of Control) in accordance with Section 10), or (iii) take any other action with respect to an Option that would be treated as a repricing under the rules and regulations of the principal U. S. national securities exchange of which the Shares are listed.
(c)Exercise of Options. The Committee shall determine the exercise schedule applicable with respect to any Option granted hereunder. Such schedule may require a minimum period of service that must be completed before all or a portion of such Option shall be exercisable, and may establish performance-based
Who can vote at the Annual Meeting? |
conditions to the exercise of such Option which are in addition to, in lieu of, or as an alternative to any service requirement. Subject to the provisions of this Section 5, once any portion of any Option has become exercisable it shall remain exercisable for its full term. The Committee shall determine the term of each Nonstatutory Stock Option or Incentive Stock Option granted hereunder, but, except as expressly provided below, in no event shall any such Option be exercisable for more than ten (10) years after the date on which it is granted.
(d)Payment. The Committee shall establish procedures governing the exercise of Options. No shares shall be delivered pursuant to any exercise of an Option unless arrangements satisfactory to the Committee have been made to assure full payment of the exercise price therefor. Without limiting the generality of the foregoing, payment of the exercise price may be made (i) in cash or its equivalent; (ii) by exchanging shares of Common Stock (which are not the subject of any pledge or other security interest) which have been owned by the person exercising the Option for at least six (6) months at the time of exercise; (iii) by any combination of the foregoing;provided that the combined value of all cash and cash equivalents paid and the Fair Market Value of any such Common Stock tendered to the Company, valuedShareholders as of the dateclose of such tender, is at least equal to such exercise price; or (ivbusiness on March 22, 2016 ("Record Date") in accordance with any other procedure or arrangement approved by the Committee. Additionally, to the extent authorized by the Committee (whether at or after grant), Options may be Net Exercised subject to such terms and conditions as the Committee may from time to time impose.
(e)Incentive Stock Options. Notwithstanding anything in the Plan to the contrary, no Option that is intended to be an Incentive Stock Option may be granted after the tenth (10th) anniversary of the effective date of the Plan and no term of this Plan relating to Incentive Stock Options shall be interpreted, amended or altered, nor shall any discretion or authority granted under the Plan be so exercised, so as to disqualify the Plan under Section 422 of the Code, or, without the consent of any Participant affected thereby, to disqualify any Incentive Stock Option under such Section 422. Incentive Stock Options may not be granted under the Plan to any Participant who is a 10% owner of the Company.
(f)Termination of Employment or Service.
(i)Due to Death. In the event a Participant's employment or service terminates by reason of death, any Options granted to such Participant shall become immediately exercisable in full and may be exercised by the Participant's designated beneficiary or, if none is named, by the person determined in accordance with Section 12(b) below, at any time prior to the earlier to occur of (i) the expiration of the term of the Options or (ii) the third (3rd) anniversary (or such earlier date as the Committee shall determinecan vote at the time of grant) of the Participant's death.
(ii)Due to Disability. In the event a Participant's employment or service is terminated by reason of Disability, any Options granted to such Participant shall become immediately exercisable in full and may be exercised by the Participant (or, in the event of the Participant's death after termination of employment or service when the Option is exercisable pursuant to its terms, by the Participant's designated beneficiary or, if none is named, by the person determined in accordance with Section 12 (b) below), at any time prior to the earlier to occur of (i) the expiration of the term of the Options or (ii) the third (3rd) anniversary (or such earlier date as the Committee shall determine at the time of grant) of the Participant's termination of employment or service.
(iii)Approved Retirement. Unless otherwise determined by the Committee at or following the time of grant, in the event a Participant's employment or service terminates by reason of Approved Retirement, the Participant shall be entitled to exercise (regardless of whether and to what extent exercisable prior thereto) (i) the number of Options (the "Last Year Options") granted during the year in which the Participant's employment or service terminates by reason of Approved Retirement (the "Retirement Year") equal to the product of (x) the Last Year Options, multiplied by (y) the Pro-Ration Fraction, and (ii) any Options granted to such Participant prior to the Retirement Year. Any exercisable Options held by a Participant at the time of the Participant's Approved Retirement (including any Last Year Options) may be exercised by the Participant (or, in the event of the Participant's death after termination of employment or service when the Option is exercisable pursuant to its terms, by the Participant's designated beneficiary or, if none is named, by the person determined in accordance with Section 12 (b) below), at any time prior to the expiration date of the term of the Options (or such shorter period following the Participant's Approved Retirement as the Committee shall determine at the time of
grant). Any of the Last Year Options that are not exercisable at the date of a Participant's Approved Retirement shall be cancelled on such date.
(iv)Termination of Employment For Cause. In the event a Participant's employment or service is terminated by the Company or any Subsidiary for Cause or by the Participant other than due to the Participant's death, Disability, Approved Retirement or Resignation, any Options granted to such Participant that have not yet been exercised shall expire at the time of such termination and shall not be exercisable thereafter.
(v)Termination for Resignation. In the event a Participant's employment or service terminates due to the Participant's voluntary resignation other than on account of Approved Retirement (a "Resignation"), any of the Participant's then outstanding Options that are exercisable on the date of such Resignation may be exercised by the Participant (or, in the event of the Participant's death after such Resignation by the Participant's designated beneficiary or, if none is named, by the person determined in accordance with Section 12 (b) below), until the later of (i) the thirtieth (30th) day following the Participant's Resignation, or (ii) if, immediately prior to such Resignation, the Participant was subject to the Company's policies restricting sales of its securities (a "Restricted Participant"), the last day of the first Trading Window that commences on or following the termination of Participant's Resignation, but in no event following the expiration of the term of such Options. Any outstanding Options that are not exercisable at the time of a Participant's Resignation shall expire at the time of such Resignation and shall not be exercisable thereafter. The "Trading Window" is a period during which officers and other key employees of the Company and its Subsidiaries may sell Common Stock without restrictions under the applicable policies of the Company. A Trading Window generally opens on the third business day following the Company's earnings release and closes on the 15th day of the last month of the quarter in which the Trading Window is opened (or the previous day if the 15th of the last month of the quarter is not a business day).
(vi)Termination of Employment for Any Other Reason. Unless otherwise determined by the Committee at or following the time of grant, in the event the employment or service of the Participant shall terminate for any reason other than one described in Section 5(f)(i), (ii), (iii), (iv) or (v) above, any Options granted to such Participant which are exercisable at the date of the Participant's termination of employment or service may be exercised by the Participant (or, in the event of the Participant's death after termination of employment or service when the Option is exercisable pursuant to its terms, by the Participant's designated beneficiary, or, if none is named, by the person determined in accordance with Section 12 (b)), until the later of (i) the thirtieth (30th) day following the Participant's termination of employment or service, or (ii) if the Participant was a Restricted Participant, the last day of the first Trading Window that commences on or following the termination of Participant's service or employment), but in no event following the expiration of the term of such Options. Any Options that are not exercisable at the time of the Participant's termination of employment or service shall expire at the time of such termination and shall not be exercisable thereafter.
SECTION 6.RESTRICTED STOCK AND RESTRICTED STOCK UNITS
(a)Grant of Restricted Stock. The Committee may grant Restricted Stock or Restricted Stock Units to Participants at such times and in such amounts, and subject to such other terms and conditions not inconsistent with the Plan as it shall determine. If Restricted Stock is evidenced by the issuance of stock certificates, the Committee shall require that such stock certificates be held in the custody of the Secretary of the Company until the Period of Restriction lapses, and that, as a condition of such Restricted Stock award, the Participant shall have delivered a stock power, endorsed in blank, relating to the Common Stock covered by such award. The terms and conditions of each grant of Restricted Stock or Restricted Stock Units shall be evidenced in writing.
(b)Restrictions on Transferability. Except as provided in Section 12(a), no Restricted Stock may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated until the lapse of the Period of Restriction. The Committee shall determine the Period of Restriction applicable with respect to any award of Restricted Stock. The Committee may provide that the Period of Restriction on Restricted Stock shall lapse, in whole or in part, upon the achievement of performance criteria, which criteria shall be selected from those available to the Committee under Section 7(c),provided, however, that any award of Restricted Stock made to
any Executive Officer that is intended to qualify as other performance based compensation under Section 162(m) of the Code shall be subject to the same restrictions and limitations applicable to Performance Share Awards under Section 7(d) and subject to the certification required under Section 7(e).
(c)Rights as a Shareholder. Unless otherwise determined by the Committee at the time of grant and subject to Section 3(g), Participants holding shares of Restricted Stock may exercise full voting rights and other rights as a shareholder with respect to those shares during the Period of Restriction.
(d)Termination of Employment Due to Disability or Death. Unless otherwise determined by the Committee at the time of grant, in the event a Participant's employment or service terminates by reason of Disability or death, any shares related to Restricted Stock held by such Participant shall become non-forfeitable on the date of termination.
(e)Termination for Approved Retirement. Unless otherwise determined by the Committee at the time of grant, in the event a Participant's employment or service terminates by reason of Approved Retirement, the following number of shares of Restricted Stock shall become non-forfeitable at the time the restrictions would have lapsed had the Participant continued in employment: (i) in case of any Award of Restricted Stock made to such Participant in the Retirement Year, the number of shares equal to the product of (i) the number of shares granted pursuant to such Award (the "Last Year Shares"), multiplied by the Pro-Ration Fraction and (ii) in the case of any Award of Restricted Stock made prior to the Retirement Year, the number of shares related to such Award. Notwithstanding the foregoing, the Committee may waive any forfeiture and transfer restrictions with respect to up to the portion of any Award of Restricted Stock described in the immediately preceding sentence as is necessary for the Participant to satisfy any applicable tax withholding obligations in connection with such Award arising at the time of such termination of employment. Any of the Last Year Shares that will not become nonforfeitable in accordance with this Section 6(e) shall be cancelled on such date.
(f)Termination of Employment for Any Other Reason. Unless otherwise determined by the Committee at or after the time of grant, in the event the employment or service of the Participant shall terminate for any reason other than one described in Section 6(d), any Restricted Stock awarded to such Participant as to which the Period of Restriction has not lapsed shall be forfeited.
(g)Restricted Stock Units. The Committee may elect to grant any Participant Restricted Stock Units, which are intended to be the economic equivalent of an award of Restricted Stock. Any such Restricted Stock Units Award shall be made on substantially the same terms as apply to an Award of Restricted Stock under this Section 6, except that a Participant receiving such Award shall not have any rights as a shareholder prior to the actual issuance of such Common Stock (although, pursuant to Section 3(g), the Committee may authorize the payment of dividend equivalents on such rights equal to the dividends that would have been payable had the corresponding equity rights been outstanding shares of Common Stock). Notwithstanding the foregoing provisions of this Section 6(g), at the time that an award of Restricted Stock Units is made (or, if later, at such time as may be permitted under transitional relief available under Section 409A of the Code), the time at which such award shall be payable (as opposed to when it becomes non-forfeitable) shall either (i) satisfy the requirements for such award to be treated as a short-term deferral within the meaning of Section 409A of the Code or (ii) shall be an event or fixed date (or more than one such permissible event or date, in the alternative) which is a permissible payment event or date for deferred compensation subject to Section 409A of the Code. For purposes of subclause (ii) of the immediately preceding sentence, if an award of Restricted Stock Units fails to specify an otherwise permissible event or date for payment, the payment date for any vested portion of any such award shall be the earlier of (i) within 60 days of the originally stated time vesting date (or, where multiple dates are used for different portions of such award, each such vesting date for each such portion), determined without regard to any accelerated vesting otherwise applicable to such award, or (ii) as provided in Section 10, the occurrence of a Change of Control which is also a change in ownership or effective control of the Company within the meaning of Section 409A of the Code.Annual Meeting.
SECTION 7.PERFORMANCE SHARES AND PERFORMANCE UNITS
(a)Generally. The Committee shall have the authority to determine the Participants who shall receive Performance Shares and Performance Units, the number of Performance Shares and the number and value of Performance Units each Participant receives for each or any Performance Period, and the Performance Criteria
How many votes do I have? |
TableYou will have one vote for every share of Contents
applicable in respect of such Performance Shares and Performance Units for each Performance Period. The Committee shall determine the duration of each Performance Period (the duration of Performance Periods may differ from each other), and there may be more than one Performance Period in existence at any one time as to any Participant or all or any class of Participants. Performance Periods may be no shorter than twelve months. Each grant of Performance Shares and Performance Units shall be evidenced in writing and shall specify the number of Performance Shares and the number and value of Performance Units awarded to the Participant, the Performance Criteria applicable thereto, and such other terms and conditions not inconsistent with the Plan as the Committee shall determine. No shares of Company common stock ("Common Stock will be issued at the time an Award of Performance Shares is made, and the Company shall not be required to set aside a fund for the payment of Performance Shares or Performance Units.
(b)Earned Performance Shares and Performance Units. Performance Shares and Performance Units shall become earned, in whole or in part, based upon the attainment of specified Performance Criteria or the occurrence of any event or events, including a Change of Control, as the Committee shall determine, either at or after the time of grant. In addition to the achievement of the specified Performance Criteria, the Committee may, at the grant date, condition payment of Performance Shares and Performance UnitsStock") you owned on the Participant completing a minimum period of service following the date of grant or on such other conditions as the Committee shall specify.Record Date.
| | 2016 Proxy Statement55 |
(c)Performance Criteria. At the discretion of the Committee, Performance Criteria may be based on the total return to the Company's shareholders, inclusive of dividends paid, during the applicable Performance Period (determined either in absolute terms or relative to the performance of one or more similarly situated companies or a published index covering the performance of a number of companies), or upon the attainment of one or more of the following criteria, whether in absolute terms or relative to the performance of one or more similarly situated companies or a published index covering the performance of a number of companies: stock price, operating earnings, net income (before or after taxes), operating income (before or after taxes), operating margin, gross margin, net earnings, return on equity, income, market share, combined ratio, level of expenses, growth in revenue, earnings before interest, taxes, depreciation and amortization (EBITDA), earnings before interest and taxes (EBIT), cash flow (including operating cash flow and free cash flow), cash flow per share (before or after dividends), earnings per share, book value per share, net revenue, return on revenue, return on invested capital, return on assets, cash flow return on investment, cash flow return on capital, economic value added, assets under management, improvements in or attainment of working capital levels, debt ratio, and, in the case of persons who are not Executive Officers, such other criteria as may be determined by the Committee. Performance Criteria may be established on a Company-wide basis or with respect to one or more business units or divisions or Subsidiaries. When establishing Performance Criteria for a Performance Period, the Committee may exclude any or all "extraordinary items" as determined under U.S. generally accepted accounting principles including, without limitation, the charges or costs associated with restructurings of the Company or any Subsidiary, discontinued operations, other unusual or non-recurring items, and the cumulative effects of accounting changes. Except to the extent that the exercise of (or the ability to exercise) such discretion in the case of Awards to Executive Officers intended to be other performance-based compensation under Section 162(m)(4) of the Code would cause them to fail to satisfy that requirement, the Committee may also adjust the Performance Criteria for any Performance Period as it deems equitable in recognition of unusual or non-recurring events affecting the Company, changes in applicable tax laws or accounting principles, or such other factors as the Committee may determine.
(d)Special Rule for Performance Criteria. If, at the time of grant, the Committee intends a Performance Share Award or Performance Unit to qualify as other performance based compensation within the meaning of Section 162(m)(4) of the Code, the Committee must establish Performance Criteria for the applicable Performance Period no later than the 90th day after the Performance Period begins (or by such other date as may be required under Section 162(m) of the Code), and the Committee shall not have the authority in respect of such Awards to exercise any discretion applicable to a grant of Performance Shares or Performance Units otherwise conveyed by this Section 7, if the ability to exercise such discretion would cause such Award not to qualify as other performance based compensation.
(e)Certification of Attainment of Performance Criteria. As soon as practicable after the end of a Performance Period and prior to any payment in respect of such Performance Period, the Committee shall certify in writing the number of Performance Shares and the number and value of Performance Units which have been earned on the basis of performance in relation to the established Performance Criteria.
(f)Payment of Awards. Earned Performance Shares and the value of earned Performance Units shall be distributed to the Participant or, if the Participant has died, to the Participant's beneficiary, as soon as practicable after the expiration
What constitutes a quorum? |
One third of the Performance Period and the Committee's certification under paragraph 7(e) above, but in no event later than the March 15 of the calendar year following the end of the Performance Period, provided that (i) earned Performance Shares and the value of earned Performance Units shall not be distributed to a Participant until any other conditions on payment of such Awards established by the Committee have been satisfied, and (ii) any amounts payable in respect of Performance Shares or Performance Units pursuant to Section 10 shall be distributed in accordance with Section 10. The Committee shall determine whether Performance Shares and the value of earned Performance Units are to be distributed in the form of cash,outstanding shares of Common Stock or in a combination thereof, withas of the value or number ofRecord Date. On the Record Date, there were 290,583,227 shares payable to be determined based on the Fair Market Value of Common Stock on the date of the Committee's certification under paragraph 7(e) above.
(g)Newly Eligible Participants. Notwithstanding anythingoutstanding. A quorum must be present, in this Section 7 to the contrary, the Committee shallperson or by proxy, before any action can be entitled to make such rules, determinations and adjustments as it deems appropriate with respect to any Participant who becomes eligible to receive Performance Shares or Performance Units after the commencement of a Performance Period.
(h)Termination of Employment.
(i)Termination of Employment due to Approved Retirement, Disability or Death. Unless otherwise determined by the Committee at or after the time of grant, a Participant whose employment or service terminates by reason of Approved Retirement, Disability or death prior to the last day of the first year in the Performance Period shall be entitled to receive (i) the same payment or distribution in respect of Performance Shares and Performance Units that would have been payable for the Performance Period had his or her employment continued until the end of the applicable Performance Period (the "Earned Performance Payment"), multiplied by (ii) the Pro-Ration Fraction. Unless otherwise determined by the Committeetaken at the time of grant, inAnnual Meeting, except an action to adjourn the event that a Participant's employment or service terminates by reason of the Participant's Approved Retirement, Disability or death on or after the last day of the first year in the Performance Period, the Participant shall be entitled to receive the Earned Performance Payment. Any Performance Shares or value of Performance Units becoming payable in accordance with the preceding sentence shall be paid at the same time as Performance Shares and the value of Performance Units are paid to other Participants (or at such earlier time as the Committee may permit). Any rights that a Participant or beneficiary may have in respect of any Performance Shares or Performance Units outstanding at the date of such termination of employment that may not be earned (or that are eligible to be earned, but are not earned) in accordance with this section 7(h)(i) shall be forfeited and canceled, effective as of the date of the Participant's termination of employment or service (or, if eligible to be earned, but are not earned, the date of the Committee's certification pursuant to Section 7(e)).meeting.
(ii)Termination for any Other Reason. Unless otherwise determined by the Committee at or after the time of grant, in the event the employment or service of the Participant shall terminate during a Performance Period for any reason other than the one described in Section 7(h)(i), all of the Participant's rights to Performance Shares and Performance Units related to such Performance Period shall be immediately forfeited and canceled as of the date of such termination of employment.
(iii)Cause. Notwithstanding anything in this Section 7 to the contrary, a Participant's rights in respect of unearned Performance Shares and Performance Units shall in all events be immediately forfeited and canceled as of the date of the Participant's termination of employment for Cause.
SECTION 8.STOCK APPRECIATION RIGHTS
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 be granted in tandem with an Option, or may be grantedvote your shares on a freestanding basis,routine items of business, but not relatedon non routine items. Proxies that are returned by brokers because they did not receive directions on how to any Option. The term and conditions of any SAR grant shall be evidenced in writing, and shall include such provisions not inconsistent with the Plan as the Committee shall determine.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 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.
562016 Proxy Statement | | |
(b)Terms and Conditions of SARs. Unless
How do I vote in person? |
If you are going to attend the Committee shall otherwise determine, the terms and conditions (including, without limitation, the exercise periodAnnual Meeting, you may vote your shares in person. However, we encourage you to vote in advance of the SAR,meeting by mail, telephone or through the vesting schedule applicable thereto andInternet even if you plan to attend the impact of any termination of service on the Participant's rights with respect to the SAR) applicable with respect to (i) SARs granted in tandem with an Option shall be substantially identical (to the extent possible taking into account the differences related to the character of the SAR) to the terms and conditions applicable to the tandem Options and (ii) freestanding SARs shall be substantially identical (to the extent possible taking into account the differences related to the character of the SAR) to the terms and conditions that would have been applicable under Section 5 above were the grant of the SARs a grant of an Option.meeting.
(c)Exercise of Tandem SARs. SARs which are granted in tandem with an Option may only be exercised upon the surrender of the right to exercise such Option for an equivalent number of shares and may be exercised only with respect to the shares of Common Stock for which the related Option is then exercisable.
(d)Payment of SAR Amount. Upon exercise of a SAR, the holder shall be entitled to receive payment, in cash, in shares of Common Stock or in a combination thereof, as determined by the Committee, of an amount determined by multiplying:
(i) the excess, if any, of the Fair Market Value of a share of Common Stock at the date of exercise over the Fair Market Value of a share of Common Stock on the date of grant, by
(ii) the number of shares of Common Stock with respect to which the SARs are then being exercised.
SECTION 9.OTHER STOCK BASED AWARDS
How do I vote my shares held in the Company's 401(k) plan? |
(a)Other Stock-Based Awards. The Committee may grant other types of equity-based and equity-related awards in addition to Options, SARs, Restricted Stock, Performance Shares, Restricted Stock Units and Performance Units, including, but not limited to, the outright grant of Common Stock in satisfaction of obligationstrustees of the Company or any Subsidiary under another compensatory plan program or arrangement, modified awards intended to comply with or structuredwill vote your shares in accordance with the provisions of applicable non-U.S. law or practice,directions you provide by voting on the voting instruction card or the sale of Common Stock,instructions in such amounts and subject to such terms and conditions as the Committee shall determine, including, but not limited to, the satisfaction of Performance Criteria. Each such Other Stock-Based Award shall be evidenced in writing and specify the terms and conditions applicable thereto. Any such Other Stock-Based Award may entail the transfer of actual shares of Common Stock or the paymentemail message that notified you of the value of such Award in cash based upon the value of a specified number of shares of Common Stock, or any combinationavailability of the foregoing, as determined by the Committee. The terms of any Other Stock-Based Award needproxy materials. Shares for which voting instructions are not be uniformreceived are voted in application to all (or any class of) Participants, and each Other Stock-Based Award granted to any Participant (whether or not at the same time) may have different terms.
(b)Termination of Employment or Service. In addition to any other terms and conditions that may be specified by the Committee but subject to the limitations set forth in Section 9(a), each Other Stock Based Award shall specify the impact of termination of employment upon the rights of a Participant in respect of such Award. At the discretion of the Committee, such conditions may be the same as those which apply with respect to Restricted Stock or Restricted Stock Units, or may be contain terms that are more or less favorable to the Participant.trustees.
(a)Accelerated Vesting and Payment. Subject to the provisions of Section 10(b) below, in the event of a Change of Control (i) each Option and SAR then outstanding shall be fully exercisable regardless of the exercise schedule otherwise applicable to such Option and/or SAR, (ii) the Period of Restriction shall lapse as to each share of Restricted Stock then outstanding, (iii) each outstanding Restricted Stock Unit shall become fully vested and payable, (iv) each outstanding Performance Share Award and Performance Unit Award shall be deemed earned at the level of performance specified in the Award Agreement for such Award, and (v) each outstanding Other Stock-Based Award shall become fully vested and payable. In addition, in connection with such a Change of Control, the Committee may, in its discretion, provide that each Option and/or SAR shall, upon the occurrence of such Change of Control, be canceled in exchange for a payment per share in cash (the "Settlement Payment") in an amount equal to the excess, if any, of the Fair Market Value over the exercise price for such Option or the base
How are shares held in the Demutualization separate account voted? |
price of such SAR. Should the Committee authorize any Settlement Payments in respect of Options, the Committee may determine that any Options which have an exercise price per share below the Fair Market Value shall be deemed cancelled and satisfied in full forPrincipal became a deemed Settlement Payment of zero. The Committee may also direct that each Restricted Stock Unit, Other Stock-Based Award, Performance Share and/or Performance Unit shall be settled in cash with its value determined basedpublic company on the Change of Control Price.
(b)Alternative Awards. Notwithstanding Section 10(a), except as otherwise specified in Section 10(c) below, no cancellation, acceleration of exercisability, vesting, cash settlement or other payment shall occur with respect to any Award if the Committee reasonably determines in good faith, prior to the occurrence ofOctober 26, 2001, when Principal Mutual Holding Company converted from a Change of Control, that such Award shall be honored or assumed, or new rights substituted therefor (such honored, assumed or substituted award hereinafter called an "Alternative Award"), by a Participant's employer (or the parent or an affiliate of such employer) immediately following the Change of Control;provided that any such Alternative Award must:
(i) be based on stock which is traded on an established U.S. securities market;
(ii) provide such Participant with rights and entitlements substantially equivalent to or better than the rights, terms and conditions applicable under such Award, including, but not limited to, an identical or better exercise or vesting schedule and identical or better timing and methods of payment; provided that, if determined by the Committee, Performance Share and Performance Unit Awards may be converted into Alternative Awards that vest and become payable solely upon the continued performance of services and in respect of the amount that would have been payable based upon performance through the date of the Change in Control or other measure of performance specified in the Participant's applicable Award Agreement.
(iii) have substantially equivalent economic value to such Award (determined at the time of the Change of Control and using valuation principles permitted under Treas. Reg. §1.424-1); and
(iv) have terms and conditions which provide that in the event that, during the 24-month period following the Change of Control, the Participant's employment or service is involuntarily terminated for any reason (including, but not limitedmutual insurance holding company to a termination due to death, Disability or without Cause) or Constructively Terminated (as defined below), all of such Participant's Options and/or SARs shall be deemed immediatelystock company (the "Demutualization") and fully exercisable, the Period of Restriction shall lapse as to each of the Participant's outstanding Restricted Stock awards, each of the Participant's outstanding Restricted Stock Units, Performance Shares and Performance Unit Awards. Other Stock-Based Awards shall be payable in full and each such Alternative Award shall be settled for a payment per each share of stock subject to the Alternative Award in cash, in immediately transferable, publicly traded securities or in a combination thereof, in an amount equal to, in the case of an Option or SAR, the excess of the fair market value of such stock on the date of the Participant's termination over the corresponding exercise or base price per share and, in the case of any Restricted Stock, Restricted Stock Unit, or Other Stock-Based Award, the fair market value of the numberinitial public offering of shares of stock subjectthe Company's Common Stock was completed. Principal issued Common Stock to 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 may give Principal Life voting directions. A plan may give voting directions by following the instructions on the voting instruction card or related thereto.
For this purpose, a Participant's employment or service shall be deemed to have been Constructively Terminated if, without the Participant's written consent, the Participant terminates employment or service within 120 days following either (x) a material reductioninstructions in the Participant's base salarymessage 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 recommends:
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 22, 2016. The notice of Internet availability of proxy materials you received in the mail, a letter from your broker or bank or a Participant's incentive compensation opportunity, or (y) the relocationphotocopy of the Participant's principal placea current account statement will be accepted as evidence of employment or service to a location more than 50 miles away from the Participant's prior principal place of employment or service.ownership.
| | 2016 Proxy Statement57 |
(c)Section 409A. Should any event constitute a Change of Control for purposes of the Plan, but not constitute a change of control within the meaning of Section 409A of the Code, with respect to any Award that is deferred compensation for purposes of Section 409A (i.e., that is not exempt from the application of such Section by reason of an available exemption, such as for stock rights, restricted property or awards qualifying as short-term deferral within the meaning of such Section 409A of the Code), no payment or distribution shall be made to any affected Participant by reason of such Change of Control (although any other modification or enhancement to the Award, such as accelerated vesting, shall still apply) and the value of such Award as determined by the Committee prior to such Change of Control shall be paid to the affected Participant on the earlier to occur of (i) the day after the six month anniversary of such Participant's termination of employment and (ii) whichever of the following is applicable to such Award (A) with respect to any unvested Award that would have
become vested solely upon the passage of time
How do I contact the Board? |
Principal has a process for shareholders and the continued performance of service, the date the Award would have otherwise become vested without regardall other interested parties to send communications to the Change of Control, (B) with respect to any unvested Award that would have become vested uponBoard through the achievement of specified Performance Criteria, onLead Director. You may contact the day following the last dayLead Director of the applicable Performance Period or (C) ifBoard through the Award was already vested at the time the Change of Control occurs, on the date on which the Award would have expired or been payable in accordance with its terms. If an event occurs that constitutes a Change of Control both for purposesInvestor Relations section of the PlanCompany's website at www.principal.com, or by writing to:
Lead Director, c/o Karen E. Shaff
Executive Vice President, General Counsel and Section 409A ofSecretary
Principal Financial Group, Inc.
Des Moines, Iowa 50392-0300
All emails and letters received will be categorized and processed by the Code,Company's Secretary and then Section 10(b) shall not be applicable with respectsent to any Award that is deferred compensation for purposes of Section 409A (i.e., that is not exempt from the application of such Section by reason of an available exemption, such as for stock rights, restricted property or awards qualifying as short-term deferral within the meaning of such Section 409A of the Code).Company's Lead Director.
SECTION 11.AMENDMENT, MODIFICATION, AND TERMINATION OF PLAN
How do I submit a shareholder proposal for the 2017 Annual Meeting? |
The Board may, atCompany'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 time and from timeshareholder wishing to time amend, modify, suspend, or terminate this Plan, in whole or in part, without notice to or the consent of any Participant, Employee or Agent;provided,however,that any amendment which would (i) increase the number of shares available for issuance under the Plan, (ii) lower the exercise price of an Option or SAR after it is granted, cancel an Option or SAR when the exercise price exceeds the Fair Market Value of a share of Common Stock in exchange for cash or another Award including Options or SARs (other than in connection with a Change of Control in accordance with Section 10), or takepropose any other action with respect to an Option or SAR that would be treatedbusiness at the annual meeting must give Principal written notice between January 17, 2017 and February 21, 2017. That notice must provide other information as a repricing under the rules and regulations of the principal U. S. national securities exchange on which the Shares are listed, (iii) extend the maximum term for Options or SARs granted hereunder or (iv) otherwise amend the Plandescribed in a material fashion that would require the approval of shareholders under the applicable rules and regulations of any exchange or automated quotation system on which the Common Stock is listed to trade shall be subject to the approval of the Company's shareholders. No amendment, modification, or termination ofBy-Laws, which are on the Plan shall in any manner adversely affect any Award theretofore granted under the Plan, without the consent of the Participant.Company's website, www.principal.com.
SECTION 12.MISCELLANEOUS PROVISIONS
What is "householding?" |
(a)Transferability. No Award granted underWe send shareholders of record at the Plan may be sold, transferred, pledged, assigned, or otherwise alienated or hypothecated, other than in accordance with Section 12 (b) below,provided thatsame address one copy of the Committee may permit transfers of Awards (other than Incentive Stock Options) to Family Members (including, without limitation, transfers effected byproxy materials unless we receive instructions from a domestic relations order) subject to such terms and conditions as the Committee shall determine, including requiring that such Awards be transferred without theshareholder requesting receipt of considerationseparate copies of these materials.
If you share the same address as multiple shareholders and would like Principal 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 at www.principal.com and at the Internet site maintained by the Participant.SEC at www.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.
(b)Beneficiary Designation. Each Participant underThe Board urges you to exercise your right to vote by using the Plan may from time to time name any beneficiaryInternet or beneficiaries (who may be named contingently or successively) to whom any benefit under the Plan is to be paidtelephone or by whom any right underreturning the Plan is to be exercised in case of the Participant's death;provided that, if the Participant shall not have designated any beneficiary under this Plan, the Participant's beneficiary shall be deemed to be the person designated by the Participant under the group life insurance plan of the Companyproxy or a Subsidiary in which such Participant participates (unless such designated beneficiary is not a Family Member). Each designation made hereunder will revoke all prior designations by the same Participant with respect to all Awards previously granted (including, solely for purposes of this Plan, any deemed designation), shall be in a form prescribed by the Committee, and will be effective only when received by the Committee in writing during the Participant's lifetime. In the absence of any such effective designation (including a deemed designation), benefits remaining unpaid at the Participant's death shall be paid to or exercised by the Participant's surviving spouse, if any, or otherwise to or by the Participant's estate. Except as otherwise expressly provided herein, nothing in this Plan is intended or may be construed to give any person other than Participants any rights or remedies under this Plan.voting instruction card.
582016 Proxy Statement | | |
(c)Deferral of Payment. At the time any Award is granted (or such earlier time as the Committee may require), the Committee may permit a Participant to elect, upon such terms and conditions as the Committee may establish, to defer receipt of shares of Common Stock that would otherwise be issued in connection with an Award.
(d)No Guarantee of Employment or Participation. The existence of this Plan, as in effect at any time or from time to time, or any grant of Award under the Plan shall not interfere with or limit in any way the rights of the Company or any Subsidiary to terminate any Participant's employment or other service provider relationship at any time, nor confer upon any Participant any rights to continue in the employ or service of the Company or any Subsidiary or any other affiliate of the Company. Except to the extent expressly selected by the Committee to be a Participant, no person (whether or not an Employee, an Agent or a Participant) shall at any time have a right to be selected for participation in the Plan or, having been selected as a Participant, to receive any additional awards hereunder, despite having previously participated in an incentive or bonus plan of the Company or an affiliate. The existence of the Plan shall not be deemed to constitute a contract of employment between the Company or any affiliate and any Employee, Agent or Participant, nor shall it constitute a right to remain in the employ or service of the Company or any affiliate. Except as may be provided in a separate written agreement, employment with or service for the Company or any affiliate is at-will and either party may terminate the participant's employment or other service provider relationship at any time, for any reason, with or without cause or notice.
(e)Tax Withholding. The Company or an affiliate shall have the right to deduct from all payments or distributions hereunder any federal, state, foreign or local taxes or other obligations required by law to be withheld with respect thereto. The Company may defer issuance of Common Stock in respect of any Award until such requirements are satisfied. The Committee may, in its discretion, permit a Participant to elect, subject to such conditions as the Committee shall impose, (i) to have shares of Common Stock otherwise to be issued under the Plan withheld by the Company or (ii) to deliver to the Company previously acquired shares of Common Stock, in either case for the greatest number of whole shares having a Fair Market Value on the date immediately preceding the date on which the applicable tax liability is determined not in excess of the minimum amount required to satisfy the statutory withholding tax obligations with respect to any Award.
(f)No Limitation on Compensation; Scope of Liabilities. Nothing in the Plan shall be construed to limit the right of the Company to establish other plans if and to the extent permitted by applicable law. The liability of the Company or any affiliate under this Plan is limited to the obligations expressly set forth in the Plan, and no term or provision of this Plan may be construed to impose any further or additional duties, obligations, or costs on the Company or any affiliate thereof or the Committee not expressly set forth in the Plan.
(g)Requirements of Law. The granting of Awards and the issuance of shares of Common Stock shall be subject to all applicable laws, rules, and regulations, and to such approvals by any governmental agencies or national securities exchanges as may be required.
(h)Term of Plan. The Plan shall be effective upon the date, if any, on which it is approved by the Company's shareholders. The Plan shall continue in effect, unless sooner terminated pursuant to Section 11 above, until the tenth anniversary of the date of such shareholder approval.
(i)Governing Law. The Plan, and all Awards granted hereunder (and the terms and conditions of any document evidencing any such grant), shall be construed in accordance with and governed by the laws of the State of Delaware, without regard to principles of conflict of laws.
(j)No Impact On Benefits. Except as may otherwise be specifically stated under any employee benefit plan, policy or program, Awards shall not be treated as compensation for purposes of calculating an Employee's or Agent's right or benefits under any such plan, policy or program.
(k)No Constraint on Corporate Action. Except as provided in Section 11 above, nothing contained in this Plan shall be construed to prevent the Company, or any affiliate, from taking any corporate action (including, but not limited to, the Company's right or power to make adjustments, reclassifications, reorganizations or changes of its capital or business structure, or to merge or consolidate, or dissolve, liquidate, sell, or transfer all or any part of its business or assets) which is deemed by it to be appropriate, or in its best interest, whether or not such action would have an adverse effect on this Plan, or any awards made under this Plan. No director, beneficiary, or other person shall have any claim against the Company, or any of its affiliates, as a result of any such action.
(l)Indemnification. Each member of the Board and each member of the Committee shall be indemnified and held harmless by the Company and each Employer against and from any loss, cost, liability, or expense that may be imposed upon or reasonably incurred by such member of the Board or Committee in
connection with or resulting from any claim, action, suit, or proceeding to which such member may be made a party or in which such member may be involved by reason of any action taken or failure to act under the Plan (in the absence of bad faith) and against and from any and all amounts paid by such member in settlement thereof, with the Company's approval, or paid by such member in satisfaction of any judgment in any such action, suit, or proceeding against such member,provided that such member shall give the Company an opportunity, at its own expense, to handle and defend the same before such member undertakes to handle and defend it individually. The foregoing right of indemnification shall not be exclusive and shall be independent of any other rights of indemnification to which any such person may be entitled under the Company's Certificate of Incorporation or By-Laws, by contract, as a matter of law, or otherwise.
(m)Rights as a Stockholder. A Participant shall have no rights as a stockholder with respect to any shares of Common Stock covered by any Award until the Participant shall have become the holder of record of such shares.
(n)Captions. The headings and captions appearing herein are inserted only as a matter of convenience. They do not define, limit, construe, or describe the scope or intent of the provisions of the Plan.
APPENDIX C
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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Third Avenue Management LLC | |
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Vanguard Group, Inc., The | |
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EE-9039-12 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 | ) | — | | — | | — | | |||||
| | | | | | | | | | | | |||||
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
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 20, 2014
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 9, 20146, 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.
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
01SKVB
Annual Meeting Notice
Principal Financial Group, Inc.’s Annual Meeting will be held on May 20, 201417, 2016 at 711 High750 Park Street, Des Moines, Iowa, at 9:00 a.m. Central Daylight Time.
The Board of Directors recommends a vote FOR proposals 1, 2 3, 4 and 5:
3: 1.Election of Directors
2.Approval of 2014 Director’s Stock Plan
3.Approval of 2014 Stock Incentive Plan
4.Advisory vote to approve executive compensation
5. 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. 20142016 Annual Meeting
2014 2016 Annual Meeting of Principal Financial Group, Inc. Shareholders
Tuesday, May 20, 2014,17, 2016, 9:00 a.m. Central Daylight TimeAuditorium
711 High 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.
PLEASE 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.
·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 9, 2014.6, 2016. 02B0UB
01SKVB
IMPORTANT ANNUAL MEETING INFORMATION
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.
below to vote your proxy. VALIDATION DETAILS ARE LOCATED BELOW IN THE TITLE BAR.
Votes Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Daylight Time, on May 16, 2014.
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. x
Annual Meeting Voting InstructionProxy 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.
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C 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.
D 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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01SKTA
. 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.
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 26, 2014, the record date, at the 2014 annual meeting of shareholders to be held on May 20, 2014 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.
IMPORTANT ANNUAL MEETING INFORMATION
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 16, 2014.
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. x
Annual Meeting Voting Instruction Card
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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C Change of Address
Change of Address — Please print new address below.
D 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.
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01SKUA
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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 26, 2014, the record date, at the 2014 annual meeting of shareholders to be held on May 20, 2014 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.
IMPORTANT ANNUAL MEETING INFORMATION
2014 Annual Meeting Proxy Card
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 20, 2014.
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. x
Annual Meeting Proxy Card
IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE.
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C Change of Address
Change of Address — Please print new address below.
D 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.
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01SKRA
2014 Annual Meeting
2014 Annual Meeting of
Principal Financial Group, Inc. Shareholders
Tuesday, May 20, 2014, 9:00 a.m. Central Daylight TimeAuditorium
711 High Street, Des Moines, Iowa
Upon arrival, please show proof
of share ownership and photo identificationat the registration desk.
You do not need to attend theAnnual Meeting to vote.
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 ofshareholders to be held at 9:00 a.m. Central Daylight Time, May 20, 2014, in the auditorium17, 2016, at the corporate headquarters.
750 Park Street. The shareholder signator(s) on this form hereby appoints Ralph C. Eucher,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 20142016 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.