Use these links to rapidly review the document
Table of ContentsExecutive CompensationTable of Contents1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No. )
Filed by the Registrantý | ||
Filed by a Party other than the Registranto | ||
Check the appropriate box: | ||
o | | Preliminary Proxy Statement |
o | | Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) |
ý | | Definitive Proxy Statement |
o | | Definitive Additional Materials |
o | | Soliciting Material under §240.14a-12 |
PRINCIPAL FINANCIAL GROUP, INC. | ||||
(Name of Registrant as Specified In Its Charter) | ||||
(Name of Person(s) Filing Proxy Statement, if other than the Registrant) | ||||
Payment of Filing Fee (Check the appropriate box): | ||||
ý | | No fee required. | ||
o | | Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11. | ||
| (1) | | Title of each class of securities to which transaction applies: | |
| (2) | | Aggregate number of securities to which transaction applies: | |
| (3) | | Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is calculated and state how it was determined): | |
| (4) | | Proposed maximum aggregate value of transaction: | |
| (5) | | Total fee paid: | |
o | | Fee paid previously with preliminary materials. | ||
o | | Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. | ||
| (1) | | Amount Previously Paid: | |
| (2) | | Form, Schedule or Registration Statement No.: | |
| (3) | | Filing Party: | |
| (4) | | Date Filed: |
Notice of 20162019 Annual Meeting
of Shareholders and Proxy Statement
Dear Fellow Shareholders:
You are invited to attend the annual meeting of shareholders on Tuesday, May 17, 2016,21, 2019, at 9:00 a.m., Central Daylight Time, at 750 Park711 High Street, Des Moines, Iowa.
As you can see, we have some exciting newswe've done in the past, Principal is taking advantage of the Securities and Exchange Commission's rule that allows companies to share. We have a new look:
We'reprovide proxy materials for the same company. Only with a bold new global identityannual meeting via the Internet to better represent who we are—a partner in financial progress, committed to helping people around the world live their best lives.registered shareholders.
The notice of annual meeting and proxy statement provide an outline of the business to be conducted at the meeting. We will also report on the progress of the Company share an update on the rollout 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, 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, Principal and the Arbor Day Foundation will plant the same number of trees in a U.S. forest. In 2015, 1,116 trees were planted.
Sincerely,
Larry D. ZimplemanChairman
Sincerely,
Daniel J. Houston
Chairman, President and Chief Executive Officer
April 7, 20169, 2019
Notice of Annual Meeting of Shareholders
Meeting Date: | Tuesday, May | |
Time: | 9:00 a.m., Central Daylight Time | |
Location: |
The annual meeting of shareholders of Principal Financial Group, Inc. ("Company" or "Principal") will be held at 750 Park Street, Des Moines, Iowa, on Tuesday, May 17, 2016 at 9:00 a.m., Central Daylight Time. The agenda is:Agenda:
The Company has not received notice of other matters that may be properly presented at the annual meeting.
You can vote if you were a shareholder of record on March 22, 2016.27, 2019. It is important that your shares be represented and voted at the meeting. Whether or not you plan to attend the meeting, please vote:
Internet | | Telephone | | |
| | |||
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 meeting, you will need to register and present a valid, government issued photo 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 22, 2016.27, 2019. 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, 20169, 2019
IMPORTANT NOTICE REGARDING AVAILABILITY OF PROXY MATERIALS
FOR THE SHAREHOLDER MEETING TO BE HELD ON MAY 17, 2016:21, 2019:
The 20152018 Annual Report, 20162019 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 or voting instruction card as explained in the How Do I Vote sections of this document.
| | |
Notice of Annual Meeting of Shareholders | | 1 |
Table of Contents | | 2 |
Director Qualifications, Director Tenure, Process for Identifying and Evaluating Director Candidates and Diversity of the Board | | 4 |
| ||
| | |
Proposal One—Election of Directors | | |
| ||
| | |
Corporate Governance | | |
Board Leadership Structure | | 13 |
Role of the Board of Directors in Risk Oversight | | |
Succession Planning and Talent Development | | |
Majority Voting | | |
Director Independence | | |
Certain Relationships and Related Party Transactions | | |
Board Meetings | | |
Global Corporate Code of | | |
Board Committees | | |
Sustainability | | 18 |
| ||
| | |
| | |
Fees Earned by Directors in | | 21 |
| | |
Restricted Stock Unit Grants | | |
Other Compensation | | 22 |
Directors' Stock Ownership Guidelines | | |
Audit Committee Report | | |
| ||
| | |
Executive Compensation | | |
Compensation Discussion and Analysis | | 24 |
| | |
| | |
Compensation Program Philosophy and Policies | | |
Summary of Compensation Elements | | |
How | | |
| | |
Base Salary | | |
Annual Incentive Pay | | |
| | |
Timing of Stock Option Awards and Other Equity Incentives | | |
Benefits | | |
Change of Control and Separation Pay | | |
| ||
Stock Ownership Guidelines | | |
Claw Back Policy | | |
Trading Policy | | |
Succession Planning | | |
Human Resources Committee Report | | |
Risk Assessment of Employee Incentive Plans | | |
Summary Compensation Table | | |
Grants of Plan Based Awards for Fiscal Year End December 31, | |
Outstanding Equity Awards at Fiscal Year End December 31, | | |
Option Exercises and Stock Vesting | |
| | | | |
2 2019 Proxy Statement | | | | |
CEO Pay Ratio | | 45 |
Pension Plan Information | | |
Pension Distributions | | |
Pension Benefits | | |
Non Qualified Deferred Compensation | | |
Qualified 401(k) Plan and Excess Plan | | |
| ||
| ||
Severance Plans | | |
Change of Control Employment Agreements | | |
Potential Payments Upon | | |
| ||
| | |
Proposal Two—Advisory Vote to Approve | | |
| ||
| | |
Proposal Three—Ratification of Appointment of Independent Registered Public Accountants | | |
Audit Fees | | |
Audit Related Fees | | |
Tax Fees | | |
All Other Fees | | |
| ||
| | |
Security Ownership of Certain Beneficial Owners and Management | | |
Section 16(a) Beneficial Ownership Reporting Compliance | | 60 |
| | |
Questions and Answers About the Annual Meeting | | |
| ||
| | |
Appendix A | | A-1 |
Appendix B | | B-1 |
| | | | |
| | | | 2019 Proxy Statement3 |
Director Qualifications, Director Tenure, Process for Identifying and Evaluating Director Candidates and Diversity of the Board
The Nominating and Governance Committee regularly assesses the expertise, skills, backgrounds, competencies and other characteristics of Directors and candidates for Board vacancies in light ofconsidering the current Board makeup and the Company's strategic initiatives, risk factors, and other relevant circumstances, such as a candidate's current employment responsibilities.circumstances. The Committee also assesses Directors' and candidates' personal and professional ethics, integrity, values and ability to contribute to the Board. TheBoard, including current employment responsibilities. In addition to personal attributes, the Board values experience as a current or former CEO or other senior executive in financial services, in international business and with financial management or accounting responsibilities. The following competencies are also particularly valued:Competencies valued by the Board include strategic orientation,and results orientation, and comprehensive decision making, risk management and an understanding of current technology issues. The Committee periodically uses an outside consultant to assist with this responsibility, and these assessments provide direction in searches for Board candidates and in the evaluation of current Directors for nomination.Directors. The Committee reviews the performance of Directorseach Director whose terms areterm is expiring as part of the determination of whether to recommend theirhis or her nomination for reelection to the Board. Input to this process is also received from the other Directors and management and an outside consultant may be engaged to assist with these reviews. Director performance and capabilities are evaluated against the characteristics and considerations noted above. Following the Committee's discussion, the outside consultant, (orif any, or the Committee Chair)Chair provides feedback to the Directors who were evaluated. The Board annually conducts a self-evaluation regarding its effectiveness, and the Audit, Finance, Human Resources and Nominating and Governance Committees also annually evaluate their respective committee's performance.
All Board members have:
Several current independent Directors have led businesses or major business divisions as CEO or President (Ms. Bernard, Dr. Costley, Mr. Dan, Mr. Ferro, Dr. Gelatt, Mr. Hochschild, Mr. Mills, Ms. Nordin, 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.
| | | | |
4 2019 Proxy Statement | | | | |
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 percentThe current Board reflects these values, for example, in the gender (50% female) and racial (20% African American) composition of the Company's independent Directors are women. Directors.
The Board's diversity objective reflects the values of the Company as
well. Principal has long been recognized as an exceptional place to work. In 2018, Forbes named Principal one of America's Best Employers. Pensions and Investments placed Principal at number seven on its list of Best Places to Work in Money Management for companies with 1,000 or more employees. IDG's Computerworld named Principal one of the 100 Best Places to Work in Information Technology for the 17th year. Principal is consistently recognized for its commitment to fostering a diverse and inclusive environment where employees can bring their best selves to work. Last year, we earned the number one spot on Forbes' list of Best Places for Women to Work. Principal was again named one of Working Mother magazine's 100 Best Companies, and was recognized for the 18th time as one of the National Association of Female Executives' Top Companies for Executive WomenWomen. Forbes placed Principal in the top ten on its list of America's Best Employers for 13Diversity and, for the third consecutive years; received top marks fromyear, Principal earned a perfect score on the Human Rights Campaign Foundation's 20162018 Corporate Equality Index; andIndex. Principal was named one of the 25 most influential companies for veteran hiring by Diversity Journal in 2015. We also were namedrecognized as one of the Ethisphere InstituteInstitute's World's Most Ethical Companies Forbes America'sfor the fifth consecutive year (and ninth year overall), emphasizing the commitment to leading ethical business standards and practices. Only five companies in the financial services industry earned this distinction in 2018. Principal was also named a Best Employers,place for Giving Back by the organization Great Place to Work, in recognition of our Volunteer Time Off policy and Working Mother magazine's 100 Best Companies. our contributions to community and charitable causes through corporate donations and employee fund matching programs.
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.
Director tenure and Board refreshment are important topics that receive considerable Board focus. 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 resultbecause of their experience. Nevertheless, 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 13.211.6 years.
Two new independent Directors were added to the Board in 2015: Roger C. Hochschild and Blair C. Pickerell. Mr. Hochschild has executive level experience in asset and investment management, retail consumer services, executive compensation, financial services, marketing, mergers & acquisitions, product development, risk management and strategic planning. Mr. Pickerell has extensive experience with the asset and investment management and financial services industries as well as considerable international expertise. Both additions were the result of a lengthy search that included consideration of numerous highly qualified director candidates. The search was led by the Nominating and Governance Committee, with the assistance of a search firm. Director candidates met with Betsy J. Bernard, Chair of the Nominating and Governance Committee, Lead Director Elizabeth Tallett, Mr. Zimpleman (then Chairman and CEO) and other members of senior management. The Nominating and Governance Committee is in the process of identifying a replacement for Dr. Costley, who has reached the Board's retirement age. We anticipate that threeFour additional tenured Directors will be replaced over the next sixfive 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 providedprovide us with helpful insight into shareholders' views on current governance topics, which were reported toare then discussed with the Nominating and Governance Committee and the full Board. This continuing process and past engagement efforts, regularly supplementsupplements relevant communications regarding corporate governance made through the Company's website and by the Investor Relations staff.
| | | | |
| | | | 2019 Proxy Statement 5 |
The Nominating and Governance Committee will consider shareholder recommendations for Director candidates sent to it c/o the Company Secretary. Director candidates nominated by shareholders are evaluated in the same manner as Director candidates identified by the Committee and search firms it retains. In addition, a stockholder or group of up to 20 stockholders, owning 3% or more of the Company's outstanding common stock ("Common Stock") continuously for at least three years, can nominate director candidates, constituting up to 20% of the Board, in the Company's annual meeting proxy materials.
| | | | |
6 2019 Proxy Statement | | | | |
Proposal One—Election of Directors
The Board is divided intohas three classes, each having a three-year term. All of the nominees are currently Directors of Principal. We have no reason to believeexpect that any ofall the nominees will be unable or unwilling for good causeable and willing to serve if elected. However, if, prior to the annual meeting of shareholders, any nominee should become unable for any reason or unwilling for good cause to serve, proxies may be voted at the 20162019 Annual Meeting for another person nominated as a substitute by the Board, or the Board may reduce the number of directors.Directors.
The Board of Directors recommends that shareholders vote "For" all of the nominees for election at the Annual Meeting.
Nominees for Class III Directors With Terms Expiring in 2019
| | |
| ||
Michael T. Dan | | Committees: Human Resources
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.
|
| ||
| | |
| ||
C. Daniel Gelatt | | Committees: Audit and
He |
| ||
| | |
| | | | |
| | | | 2019 Proxy Statement 7 |
| | |
| ||
Sandra L. Helton | | Committees: Audit (Chair),
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.
|
| ||
| | |
| ||
Blair C. Pickerell | | Committees: Finance and
|
| ||
| | |
| | | | |
8 2019 Proxy Statement | | | | |
Continuing Class III Directors With Terms Expiring in 20182020
|
| |
|
| |
|
| |
Continuing Directors in Class I With Terms Expiring in 2017
| | |
| ||
Betsy J. Bernard | | Committees:
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 from 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 President—National Mass Markets at Qwest Communications from 2000-2001, and responsible for all retail markets at U S West as Executive Vice President—Retail from 1998-2000. Ms. Bernard was a 2015 NACD Directorship 100
|
| ||
| | |
| ||
Jocelyn Carter-Miller | | Committees: Finance (Chair)
|
| ||
| | |
| | | | |
| | | | 2019 Proxy Statement 9 |
| | |
| ||
| | Committees:
Mr.
|
| ||
| | |
Continuing Class II Directors With Terms Expiring in 2021
| | |
| ||
Diane C. Nordin | | Committees: Audit and
|
| ||
| | |
| | | | |
10 | | | ��� | |
| | |
| ||
Roger C. Hochschild | | Committees: Audit and |
| ||
| | |
| ||
Daniel J. Houston | | Committees: Executive (Chair) |
| ||
| | |
| | | | |
| | | | 2019 Proxy Statement 11 |
| | |
| ||
Elizabeth E. Tallett | | Committees: Human Resources, |
| ||
| | |
| | | | |
12 2019 Proxy Statement | | | | |
The Company's Board and management regularly review best practices for corporate governance and modify our policies and practices as warranted. Our current best practices include:
The Board believes it should have theexercises flexibility to establishin establishing a leadership structure that works best for Principal at any given time and reviews that structure as appropriate.time. 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 ZimplemanDaniel J. Houston 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 appointedhad a Lead Director because it is important that the independent Directors have a formally acknowledged leader in addition to the Chairman of the Board who leads the Board generally. The Board regularly reviews the effectiveness of this shared leadership. The decision of whetherWhether to separate or combine the ChairChairman 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. As was the case during the past year, Principal followed a pattern of separatinghas separated 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, aresponsibilities. The Board prefers this flexible approach is preferable to an approacha requirement that either requiresthe positions of Chairman andCEO be combined or disallows a combined Chairman/CEO.
separate. Ms. Tallett, is the Lead Director, and Ms. Bernard is the Alternate Lead Director.
The Lead Director and Alternative Lead Director arewas selected by the independent Directors. The Nominating and Governance Committee reviews the assignmentsappointment of Lead Director and Alternate Lead Director annually.
The Lead Director and the Chairman jointly make the decisionsdecide 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:
| | | | |
| | | | 2019 Proxy Statement |
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, comprisedcomposed 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 oversees management's execution and performance of its risk management responsibilities. The Board reviews strategic threats, opportunities, and risks Principal and particularits businesses or functions are managing. OversightThis includes oversight of other risks such as credit, market, liquidity, product, operational, cybersecurity, reputational and general business risk isthat are handled directly by the Board or by Board Committees as discussed below:
The Audit Committee: risk and mitigation related to accounting, financial controls, legal, regulatory, ethics, compliance, operations and general business activities. The Audit Committee also oversees the framework and policies with respect to enterprise risk assessment and management.
The Finance Committee: risk and mitigation related to liquidity, credit, market, product and pricing activities. The Finance Committee also oversees capital management, capital structure and financing, investment policy, tax planning, and key risks associated with significant financial transactions. The Finance Committee also provides guidance to the Human Resources Committee on the appropriateness of Company financial goals used in annual and long-term employee incentive compensation arrangements.
The Human Resources Committee: risk and mitigation related to the design and operation of employee compensation arrangements to confirm they are consistent with business plans, do not encourage inappropriate risk taking and are appropriately designed to limit or mitigate risk. The Human Resources Committee also oversees succession planning and development for senior management.
The Nominating and Governance Committee: risks and mitigation related to the Company's environmental, sustainability and corporate social responsibilities as well as the Company's political contribution activities. The Nominating and Governance Committee also monitors the need forwhether the Board and its committees to have the collective skills and experience necessary to monitor the risks facing the Principal.
The Chief Risk Officer and other members of senior management provide reports and have discussions with the Board and its committees on our risk profile and risk management activities. Discussions includeactivities, including reviews of ongoing adherence to policy, impacts of external events, and how strategy, initiatives, and operations integrate with our risk objectives. The Board also receives perspectivesinput on these issues from external entities such as our independent auditor, regulators and consultants. These presentations and discussionsactivities provide the Board with a greater understanding of the material risks the organization faces,we face, the level of risk in actionsmatters presented for Board approval, and how certain risks relate to other risks, and whether management is responding appropriately,are related.
During 2015, the Board deepened its emphasis on cybersecurity risk and our information security program. The Board views thiscybersecurity risk as an enterprise wide concern that involves people, process,processes, and technology, and accordingly treats it as a Board level matter. It embodies a persistent and dynamic threat to our entire industry thatand is not limited to information technology. The Board will remain focused on this critical priority by continuing to receive regular reports from the Chief Information Officer, the Chief Information Security Officer, and othersother professionals to ensure that itmanagement has established and is monitoringproactively maintaining an enterprise wide cyber threat intelligencerisk program including necessary policies and taking the steps necessary to implement the needed safeguards and protocolscontrols to manage the risk.
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 CEO succession planning as well as succession planning for 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.levels, including CEO. High potential leaders are given exposure and visibility to Board members through formal presentations and informal events and the Human Resources Committee also receives regular updates on key talent indicators for the overall workforce, including diversity, recruiting and development programs.
| | | | |
14 2019 Proxy Statement | | | | |
In uncontested Director elections, Directors are elected by the majority of votes 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
decide whether to accept the resignation. The Board's decision and reasons in support offor its decision will be publicly disclosed within 90 days of certification of the election results.
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 requirementsNasdaq standards for independence and are on the Company's website, www.principal.com. The Board considers all commercial, banking, consulting, legal, accounting, charitable, family and other relationships (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 2016,2019, 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. Hochschild, Mr. Mills, Ms. Nordin, Mr. Pickerell and Ms. Tallett. The Board also determined that all current members of the Audit, Finance, Human Resources and Nominating and Governance Committees are independent. No Director other than Mr. Houston has been employed by the Company at any time.
Some Directors have categorically immaterial relationships and transactions with Principal:
Certain Relationships and Related Party Transactions
Nippon Life Insurance Company ("Nippon Life"), which held approximately 6.2%6.3% of the Company's Common Stock at the end of 2015,2018, is the parent company of Nippon Life Insurance Company of America ("NLICA"). Nippon Life, NLICA and Principal Life have had a business relationshiprelationships for more than 20 years. In 2015,2018, Nippon Life and NLICA paid the following amounts to Principal Life or its subsidiaries and affiliates: $91,670.69$179,327 for pension services for defined contribution plans maintained by NLICA and an affiliate (mostly paid by plan participants); $1,250 for deferred compensation plan services; $757,246.30$7,567,947 for investment services;. Principal Global Investors (Japan) Ltd. paid Nippon Life $2,607.00 for 401(k) plan administration.services. 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 20152018 of $62,700,000$61,150,000 during Nippon Life's $2 billion public issuance in October of 2012. Since May 1, 2013, NLI US Investments, Inc. ("NLI"), has owned 20%owns approximately 19.80% of Post Advisory Group, LLC ("Post"), an affiliate of the Company. During 2015,2018, Post paid NLI an aggregate of $2,724,846.71$2,772,488.46 in dividends.
Due to the longstanding relationship between Nippon and Principal Life, Nippon employees occasionally train on-site at Principal Life or at one of its affiliates. During 2015,2018, Principal Management Corporation, an affiliate of the Company ("PMC"),Life paid Wellington Management Company $3,990,303.76 for sub-advisory services furnished to a registered investment companyNippon Life $134,996 in salary reimbursements in connection with these situations. Principal affiliates manage accounts holding securities issued by Nippon Life, and Nippon Life invests in funds managed by PMC. AsPrincipal affiiates.
| | | | |
| | | | 2019 Proxy Statement 15 |
Table of the end of 2015 Wellington owned approximately 6.5% of the Company's Common Stock.Contents
As of December 31, 2015,2018, the Vanguard Group, Inc. managed funds holding in the aggregate 8.3%10.73% of the Company's Common Stock. During 20152018 Principal Shareholder Services, Inc. paid Vanguard $88,427.27$44,551 for sub-transfer agent services. During 2018, Vanguard paid $1,059,786$1,228,848 in rent for lease of space to a borrower of the Principal Life Insurancegeneral account. Principal Life and affiliates hold, or manage accounts holding, securities issued by Vanguard funds.
As of December 31, 2018, BlackRock, Inc. and certain subsidiaries collectively owned or managed funds holding in the aggregate 6.7% of the Company's common stock. During 2018, Principal Global Investors, LLC paid BlackRock Fund Advisors $1,789,443 in management fees associated with the Principal Funds, Inc. In 2018, Principal Life paid BlackRock, Inc. $2,597,513 for fees in connection with the use of the Aladdin system and $373,382 for software. In 2018, PGI Trust Company general account.
Tablepaid BlackRock Fund Advisors $64,377.34 in sub-advisory fees associated with the Morley Actively Managed Fund. In 2018, a Principal affiliate paid $20,503 in mangement fee rebates to a BlackRock affiliate. Principal Life and affiliates hold, or manage accounts holding, securities issued by BlackRock, Inc. BlackRock affiliates manage investment funds in which affiliates of Contentsthe Company invest for their own or managed accounts.
Dwight Soethout, Vice President—Finance, is the spouse of Deanna D. Strable-Soethout, Executive Vice President and Chief Financial Officer. Mr. Soethout has been an employee of the Company since 1993. In 2018, he received approximately $599,284 in base salary, annual bonus and long-term incentive compensation from Principal Life. His compensation is commensurate with that of his peers. His employment and compensation were approved by the Human Resources Committee.
The Company maintains robust policies and procedures for the identification and monitoring of arrangements with related parties. The Nominating and Governance Committee or its Chair must approve or ratify all transactions with Related Partiesrelated parties that are not preapproved underby or exempted from the Company's Related Party Transaction Policy.Policy (the "Policy"). At each quarterly meeting, the Committee reviews any nonmaterial transactions with Related Parties. The Committeerelated parties and ratifies these transactionsany transaction that is subject to the Policy if it determines they are appropriate.it is appropriate and may attach conditions to that approval. 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 at www.principal.com.
The Board held 1012 meetings in 2015,2018, five of which were two day, in person meetings. Each of the DirectorsNo Director then in office attended moreless than 75% inof the aggregate of the meetings of the Board and the committees of which the Director was a member except Richard L. Keyser and Luca Maestri who left the board in May of 2015.member. All of the other Directors then on the Board attended the 20152018 Annual Meeting.Meeting except Dennis Ferro who left the Board in May 2018.
Global Corporate Code of Business Conduct and Ethics
Each Director and officer of the Company has certified compliancethey comply with thePrincipal's Global Code of Business Conduct, and Ethics, which serves as the foundation for ethical behavior across the organization. The Code is available at www.principal.com.
Only independent Directors may serve on the Audit, Human Resources and Nominating and Governance Committees. The Committees review their charters and 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.
| | | | |
| | | | |
Current membershipMembership and responsibilities of each of the Board Committees:
Committee | | Responsibilities | | Members (*Committee Chair) | | Meetings Held in |
---|---|---|---|---|---|---|
| | | | | | |
Audit | | • Appointing, terminating, compensating and overseeing the Company's independent auditor and selecting the lead audit partner; • 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; • Reviewing the Company's policies on risk assessment and management. All members of the Audit Committee are financially literate and are independent, as defined in the | | C. Daniel Gelatt Sandra L. Helton* Roger C. Hochschild Diane C. Nordin | | |
| | | | | | |
Human Resources | | • Evaluating the performance of the CEO and determining his compensation relative to his goals and objectives; • Approving compensation for all other officers of the Company and Principal Life at the level of Senior Vice President and above • Approving employment, severance or change of control agreements and perquisites for Executives; • Overseeing Executive development and succession planning; • Approving • Approving equity awards; • Administering the Company's incentive and other compensation plans that include Executives; • Acting on management's recommendations for broad based employee pension and welfare benefit plans; • Reviewing compensation programs to confirm that they encourage management to take appropriate risks; discourage inappropriate risks and act consistently with the Company's business plan, policies and risk tolerance. | | Betsy Michael T. C. Daniel Gelatt Diane C. Elizabeth E. Tallett | | 6 |
| | | | | | |
Nominating and Governance | | • Recommends Board candidates, Board committee assignments and service as • Reviews and reports to the Board on Director independence, performance of individual Directors, process for the annual self evaluations of the Board and its performance and committee self evaluations, content of the Global Code of • Reviews environmental and corporate social responsibility matters as well as the Company's political contribution activities. | | Jocelyn Carter-Miller Michael T. Dan Scott M. Mills* Blair C. Pickerell Elizabeth E. Tallett | | |
| | | | | | |
| | | | |
| | | | 2019 Proxy Statement |
Committee | | Responsibilities | | Members (*Committee Chair) | | Meetings Held in |
---|---|---|---|---|---|---|
| | | | | | |
Finance | | • Assists the Board with financial, investment and capital management policies; • Reviews capital structure and plans, significant financial transactions, financial policies, credit ratings, matters of corporate finance, including issuance of debt and equity, shareholder dividends, proposed mergers, acquisitions and divestitures; Reviews and provides guidance on financial goals; • Oversees investment policies, strategies and programs; Reviews policies and procedures governing the use of financial instruments including derivatives; and assists the Board in overseeing and reviewing information regarding enterprise financial risk management, including the policies, procedures and practices to manage liquidity, credit market, product and pricing risks and tax planning. | | Jocelyn Carter-Miller* Sandra L. Helton Roger C. Hochschild Blair Pickerell | ||
| | | | | ||
| | |||||
Executive | | Acts on matters delegated by the Board which must be approved by its independent members. Has the authority of the Board between Board meetings unless the Board has directed otherwise or as mandated by law and in the By Laws. | | Betsy J. Bernard Sandra L. Helton Daniel J. Houston Elizabeth E. Tallett | | None |
Doing what matters most for our global community
Principal aims to provide not only positive financial outcomes for our clients and customers, but also positive outcomes for the communities in which it operates across the globe. Our commitment means we will invest, conserve, volunteer and lead responsibly and sustainably to help realize the promise of May 18, 2015
A full review of August 17, 2015
Giving back: Helping people is an important part of the BoardPrincipal culture, and our employees, along with the Principal Financial Group Foundation, work together to give back, with a focus on supporting people's progress toward long-term financial security. In the next five years, we are focusing on reaching 50,000 persons, ages 15-30, around the world and helping them earn and save more. Highlights of Directors beginning afterrecent developments and results include:
Sustaining the environment: Principal works to reduce its environmental impact while engaging our employees, stakeholders, and supply chain through awareness initiatives. Our results include:
| | | | |
| | | | |
Investing responsibly: Our flagship asset management affiliate, Principal Global Investors ("PGI"), integrates ESG investing principles into its approach to portfolio management across asset classes, and PGI's signatory status to the United Nations sponsored Principles for Responsible Investment gives us a voice in defining and shaping the ongoing global ESG discussion. As a result of its efforts, PGI received an A+ grade relative to the Principles for Responsible Investment following an assessment of its 2018 ESG investment practices. Integrating ESG factors takes place across all asset classes managed by PGI, with the specific approach determined by the applicable investment process and asset class.
The commitment to ESG issues of our equity securities investment management group, Principal Global Equities, is centered on one factor: the fiduciary responsibility owed to clients to act in their long-term interests. Principal Global Equities has over a decade of custom socially responsible and faith-based mandates for $2.5 billion of assets under management. ESG strategies utilized include the qualitative assessment of risk factors and change catalysts and the use of analytical tools to increase the understanding of risks and issues, recognizing that trends and scope for change matter more than nominal scores.
The investment analysts staffing our fixed income investment group, Principal Global Fixed Income, supplement their fundamental research with insights from ESG research providers. Robust and evolving training programs for our research analysts to enhance awareness of ESG considerations have been incorporated into its processes. The group manages nearly $159 million of assets in renewable energy and green bonds. Principal Global Fixed Income creates client-defined ESG portfolios by eliminating assets specified by a client and by:
Our real estate asset management affiliate, Principal Real Estate Investors ("PrinREI"), uses a unique ESG framework called the Pillars of Responsible Property Investing ("PRPI") initiative to help drive asset management and fiduciary governance and deliver positive financial and environmental results for 175 assets totalling more than 35 million square feet of real estate with a gross asset value of approximately $10.8 billion. The Principal Real Estate Investors Responsible Property Investing Policy covers all phases of the real estate investment lifecycle and guides PrinREI's approach to real estate investment and management for these properties.
The PRPI philosophy integrates ESG within every aspect of PrinREI's investment process for these assets, including:
PrinREI's recent achievements include (all as of the third quarter of 2018):
| | | | |
| | | | 2019 Proxy Statement 19 |
Advancing a culture of diversity and inclusion: Principal defines diversity as "the mix" and inclusion as making the most of "the mix." Our robust diversity and inclusion effort manifests itself in a variety of ways, including nearly a dozen active employee resource groups, inclusion programs, Board diversity, and recruitment of world class talent. Recent highlights include:
Promoting diversity among suppliers: Just as we value diversity among our employees, we value diversity among our suppliers and partners to help create innovative solutions and build stronger communities. Our Supplier Diversity Program seeks qualified businesses to help meet current and future business needs. Principal is affiliated with a number of supplier diversity organizations to provide these connections, including: Women's Business Enterprise National Council, National Minority Supplier Development Council, United States Hispanic Chamber of Commerce, U.S. Pan Asian American Chamber of Commerce, National Gay & Lesbian Chamber of Commerce, National Veteran Owned Business Association, U.S. Business Leadership Network Disability Supplier Diversity Program, and Financial Services Roundtable for Supplier Diversity.
| | | | |
20 2019 Proxy Statement | | | | |
Directors serve on the Boards of the Company, Principal Life and Principal Financial Services, Inc. Directors who are also employees do not receive any compensation for their service as Directors. The Company provides competitive compensation to attract and retain high quality non-employee Directors. A substantial proportion of non-employee Director compensation is provided in the form of equity to help align such Directors' interests with the interests of shareholders.
The non-employee 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 afor this purpose. During 2018, Compensation Advisory Partners conducted an annual comprehensive review and assessment of Director compensation. Cook last reviewed Director compensation in November of 2015. The Company targets non-employee Director compensation at approximately the median of the peer group used for Executive compensation comparisons ("Peer Group") (see page 26)pages 30-31), which aligns with its Executive compensation philosophy. AsDirector compensation did not change as a result of thatCompensation Advisory Partners November 2018 review andbecause it is generally positioned at the Committee's discussion, no changes were made to the Boardmedian of compensation program, except with respect to the nonexecutive Chairman, as detailed below.within Principal's Peer Group. It was last changed effective November 27, 2017.
| | |
| Effective | |
| | |
Annual Cash Retainers(1) | | |
| | |
- Board | | $ |
| | |
- Audit Committee Chair | | $20,000 |
| | |
- Human Resources Committee Chair | | $ |
| | |
- Finance Committee Chair | | $ |
| | |
- Nominating & Governance Committee Chair | | $ |
| | |
- Other Committee Chairs | | $ |
| | |
- Lead Director | | $25,000 |
| | |
Annual Restricted Stock Unit Retainer(2) | | $165,000 |
| ||
| |
Effective January 4, 2016, Mr. Zimpleman became a non executive Chairman of the Board, and he will be paid an annual retainer of $200,000 for this service, in addition to the normal compensation provided to non-employee members of the Board, both prorated for the period January 1 - May 17, 2016.
Fees Earned by Non Employee Directors in 20152018
| | | | | | | | | | | | | | | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | ||||||||||
Name | | Fees Earned or Paid in Cash | | Stock Awards(1) | | Total | | | Fees Earned or Paid in Cash | | Stock Awards(1) | | Total | | ||||||||||
| | | | | | | | | | | | | | | ||||||||||
Betsy J. Bernard | | | $ | 132,000 | | | $ | 129,990 | | $ | 261,990 | | | | $ | 117,500 | | | $ | 164,950 | | $ | 282,450 | |
| | | | | | | | | | | | | | | ||||||||||
Jocelyn Carter-Miller | | | $ | 133,000 | | | $ | 129,990 | | $ | 262,990 | | | | $ | 120,000 | | | $ | 164,950 | | $ | 284,950 | |
| | | | | | | | | | | | | | | ||||||||||
Gary E. Costley | | | $ | 119,000 | | | $ | 129,990 | | $ | 248,990 | | ||||||||||||
| | | | | | | | |||||||||||||||||
Michael T. Dan | | | $ | 130,000 | | | $ | 129,990 | | $ | 259,990 | | | | $ | 105,000 | | | $ | 164,950 | | $ | 269,950 | |
| | | | | | | | |||||||||||||||||
Dennis H. Ferro | | | $ | 127,500 | | | $ | 129,990 | | $ | 257,490 | | ||||||||||||
| | | | | | | | | | | | | | | ||||||||||
C. Daniel Gelatt Jr. | | | $ | 123,500 | | | $ | 129,990 | | $ | 253,490 | | | | $ | 100,000 | | | $ | 164,950 | | $ | 264,950 | |
| | | | | | | | | | | | | | | ||||||||||
Sandra L. Helton | | | $ | 142,000 | | | $ | 129,990 | | $ | 271,990 | | | | $ | 120,000 | | | $ | 164,950 | | $ | 284,950 | |
| | | | | | | | | | | | | | | ||||||||||
Roger C. Hochschild | | | $ | 126,943 | | | $ | 145,143 | | $ | 272,086 | | | | $ | 102,500 | | | $ | 164,950 | | $ | 267,450 | |
| | | | | | | | | | | | | | | ||||||||||
Richard L. Keyser | | | $ | 6,000 | | | $ | 0 | | $ | 6,000 | | ||||||||||||
Scott M. Mills | | | $ | 120,000 | | | $ | 164,950 | | $ | 284,950 | | ||||||||||||
| | | | | | | | | | | | | | | ||||||||||
Luca Maestri | | | $ | 6,000 | | | $ | 0 | | $ | 6,000 | | ||||||||||||
Diane C. Nordin | | | $ | 100,000 | | | $ | 164,950 | | $ | 264,950 | | ||||||||||||
| | | | | | | | | | | | | | | ||||||||||
Blair C. Pickerell | | | $ | 83,189 | | | $ | 97,866 | | $ | 181,055 | | | | $ | 100,000 | | | $ | 164,950 | | $ | 264,950 | |
| | | | | | | | | | | | | | | ||||||||||
Elizabeth E. Tallett | | | $ | 139,000 | | | $ | 129,990 | | $ | 268,990 | | | | $ | 125,000 | | | $ | 164,950 | | $ | 289,950 | |
| | | | | | | | | | | | | | |
| | | | |
| | | | 2019 Proxy Statement 21 |
Non-Employee Directors' Deferred Compensation Plan
Non employee 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 44-45.2018 were:
| ||
---|---|---|
| | |
Investment Option | | 1 Year Rate Of Return (12/31/2018) |
| | |
Principal Financial Group, Inc. Employer Stock Fund | | –34.42% |
| | |
Principal LargeCap S&P 500 Index R5 Fund | | –4.76% |
| | |
Principal Real Estate Securities R5 Fund | | –4.47% |
| | |
Principal Core Plus Bond R5 Fund | | –1.94% |
| | |
Non-employee 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 until 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) affordsallows 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.
Table of Contentsmade.
As of December 31, 2015,2018, each non-employee Director had the following aggregate number of outstanding RSUs, as a result of Director compensation in 2015 and prior years, including additional RSUs received as the result of dividend equivalents:
| | |
---|---|---|
| | |
Director Name | | Total RSUs Outstanding Fiscal Year End (Shares) |
| | |
Betsy J. Bernard | | |
| | |
Jocelyn Carter-Miller | | |
| | |
| ||
Michael T. Dan | | |
| ||
| | |
C. Daniel Gelatt | | |
| | |
Sandra L. Helton | | |
| | |
Roger C. Hochschild | | |
| | |
Scott M. Mills | | 7,543 |
| | |
| | |
| ||
| ||
| | |
Blair C. Pickerell | | |
| | |
Elizabeth E. Tallett | | |
| | |
Principal Life matches charitable gifts up to an annual amount of $16,000 per nonemployee Director.non-employee Director 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.
| | | | |
22 2019 Proxy Statement | | | | |
Directors are reimbursed for travel and other business expenses they incur while performing services for the Company. When Directors' spouses/partners may accompany them to the annual Board strategic retreat.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 20152018 the total amount of perquisites provided to nonemployeenon-employee Directors was less than $10,000 in all cases.per Director.
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 throughwhile a Director's serviceDirector is 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 willdo not need to makebuy additional share purchasesstock if the guideline is no longer met due to a reduction in stock price, as long asif the Director's ownership level is not reduced as a resultbecause of share sales.
The Audit Committee oversees the Company's financial reporting process. ManagementCompany 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, 2015,2018, 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 applicable Public Company Accounting Oversight Board (United States) ("PCAOB") in Rule 3200T. SAS 114 requiresstandards. These standards require 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, significant difficulties, if any, encountered in performing the audit, uncorrected misstatements identified during the audit,
other than those the auditor believes are trivial, if any, any disagreements with 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, 2015,2018, for filing with the SEC.Securities and Exchange Commission (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, 2016.2019.
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, ChairGary E. CostleyDennis H. FerroBetsy J. Bernard
C. Daniel Gelatt
Roger C. Hochschild
Diane C. Nordin
| | | | |
| | | | 2019 Proxy Statement 23 |
Contents: | | Page | |||
---|---|---|---|---|---|
Compensation Discussion & Analysis ("CD&A") | | ||||
| |||||
•
| | 25 | |||
• 2018 Compensation Highlights | | ||||
• Compensation Program Philosophy and Policies | | ||||
• Summary of Compensation Elements | | ||||
• How we make Compensation Decisions | | ||||
•
| | ||||
• Base Salary | | ||||
• Annual Incentive Pay | | ||||
•
| | ||||
• Timing of Stock Option Awards and Other Equity Incentives | | ||||
• Benefits | | ||||
• Change of Control & Separation Pay | | ||||
| |||||
• 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 | | ||||
• CEO Pay Ratio | | 45 | |||
• 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 20152018 compensation program and reviews the outcomes, including the Company's financial performance in 2015.2018. Our "Named Executive Officers" in 2015 are listed below. Talent and succession planning are a critical part of the Board's responsibilities. In 2015, Larry Zimpleman announced his retirement, and, as part of the planned succession process, Daniel J. Houston was promoted to the position of CEO. Effective May 17, 2016, Mr. Houston will also be Chairman of the Board.2018 were—
| | | | |
24 2019 Proxy Statement | | | | |
20152018 Company Highlights:Performance Highlights:
Despite external challengesIn 2018, Principal generated $1.5 billion of net income attributable to Principal Financial Group and a record $1.6 billion of non-GAAP operating earnings(1), an 8% increase from 2017 on a reported basis.
We deployed $1.4 billion of capital in 2015, such as2018, or 90% of net income. We take a balanced and disciplined approach to capital deployment—we returned $1.2 billion of capital to shareholders through common stock dividends and share repurchases in 2018 and we deployed $140 million through strategic acquisitions, including expansion in Asia and a digital advice platform.
Over the volatile equitycourse of 2018, our assets under management decreased by $42 billion, or 6 percent, to $627 billion at year-end, primarily due to unfavorable market conditionsperformance and foreign currency translation, we had strong results, with operating earnings(1) of $1.27 billion in 2015 compared to $1.32 billion in 2014. The Company continued to have strong fundamentals, solid momentum and good underlying growth.exchange.
In 2015, 93% of our investment options were above median for five-year performance at year-end, and 76 of our rated funds had 4 or 5 stars from Morningstar. This strong investment performance, responsive service, and an expanding array of offerings, resulted in our second best2018 was another year of net customer cash flows on recordstrong execution in a volatile macroeconomic environment. Competitive and macroeconomic challenges remain, but we go forward from a position of $23 billion.strength with strong underlying fundamentals and the benefit of diversification.
We also saw the growth potential (and diversification benefits) of our U.S. Insurance Solutions businesses, which delivered a 20 percent increase in pre-tax operating earnings.
In 2015, the Company'sOur total shareholder return performance over the past five years was positioned well ahead of our asset manager peers and was slightly above the average ofbehind our Peer Group used for compensation purposes (–10.5% vs. –16.6%).insurance peers. Our three year total shareholder return also continues to be higher, with a three year total shareholdermethodology includes the share price return of 71%, compared to an average total shareholder return of 42% for companies inand cash dividends paid during the Peer Group.time period.
20152018 Compensation Highlights
| | | | |
| | | | 2019 Proxy Statement 25 |
approval of the compensation program to be approval of the Company's compensation philosophy, which has not changed since that vote. The compensation program design and structure has also not changed in the past year, and all changes to compensation levels have been consistent with the Company's compensation philosophy.
Compensation Program Philosophy and Policies
Compensation Philosophy—our compensation programs are designed to:
| | | | |
26 2019 Proxy Statement | | | | |
Compensation Policies—Principal's Executive compensation program incorporates the following best practices:
| | | | | | | | |
| Independent Consultant | | | The Human Resources Committee's independent compensation consultant is selected and retained by the Committee to advise on Executive and Director compensation and does no other work for the Company. The independent compensation consultant to the Human Resources Committee is Compensation Advisory Partners. | | |||
| | | | | | | | |
| Risk Review | | | The Human Resources Committee annually reviews an analysis of the Company's incentive compensation plans to ensure they are designed to create and maintain shareholder value, provide rewards based on the long-term performance of the Company and do not encourage excessive risk. | | |||
| | | | | | | | |
| Emphasis on Variable Compensation: | | | Most of our Executive compensation is variable and linked to meeting our short term and long-term financial and strategic goals and to the performance of the Company's stock over time. 92 percent of our CEO's 2018 target compensation and an average of 82% of our other Named Executive Officer's target total compensation are variable and tied to Company performance. | | |||
| | | | | | | | |
| Executive Ownership | | | Executives receive a significant portion of their compensation in stock, as noted in the chart on page 32, and are required to own a meaningful amount of stock in the Company, both of which contribute to strong alignment of management and shareholder interests. | | |||
| | | | | | | | |
| Prohibition on Hedging | | | Principal prohibits all employees, including Named Executive Officers, from purchasing any Principal securities on margin (except for exercising stock options), engaging in short sales or trading in any put or call options; and purchasing, directly or indirectly, any financial instrument (including prepaid variable forward contracts, equity swaps, collars and exchange funds) that is designed to hedge or offset any decrease in the market value of Principal securities. | | |||
| | | | | | | | |
| Clawback Policy | | | Principal has a compensation recovery policy that applies to Executives. Principal can recover incentive compensation if the amount of the compensation was based on achievement of financial results that were subsequently restated if the Committee decides that the Executive engaged in fraud or intentional misconduct that caused the restatement of the Company's financial statements, and if the amount of the Executive's incentive compensation or equity award would have been lower had the financial results been properly reported. Principal can also cancel or recover incentive compensation received in the event of either reputational or financial harm to the Company that arises directly or indirectly from an Executive's misconduct, gross negligence, misfeasance or nonfeasance. | | |||
| | | | | | | | |
| Market Severance Protection | | | Our change of control agreements with Executives provide market based severance protection and do not provide excise tax gross ups. | | |||
| | | | | | | | |
| Limited Perquisites | | | We do not provide perquisites to Executives that are not offered to all employees, except one physical examination per year, business spousal travel, and gifts of nominal value given to all sales conference attendees. | | |||
| | | | | | | | |
| No Repricing | | | We have not repriced underwater stock options and we will not do so without shareholder approval. | | |||
| | | | | | | | |
| Tax and Accounting Efficiency | | | Our programs are designed, to the extent possible, to be financially efficient from tax, accounting, cash flow and share dilution perspectives. | | |||
| | | | | | | | |
| No Gross Ups | | | Executives do not receive any income tax gross ups. | | |||
| | | | �� | | | | |
| | | | |
| | | | 2019 Proxy Statement |
Summary of Compensation Elements:
| | | | | | | | | | | | |
| | Compensation Component | | | | Objective | | | | Description and | | |
---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | |
| Base Salary | | | Provides fixed income based on the size, scope and complexity of the Executive's role, Executive's historical performance and relative position compared to market pay information | | | In | | ||||
| | | | | | | | | | | | |
| ||||||||||||
Annual Incentive Compensation | | | Motivates and rewards annual corporate performance as well as the Executive's contribution to achieving our annual objectives. | | | A range of earnings opportunity, expressed as percentages of base salary and corresponding to three levels of performance (threshold, target and maximum), is established for each Executive. Actual bonuses depend on achievement relative to the key financial measures, corporate and divisional goals, as outlined on pages Based on the Committee's assessment of performance, actual bonuses for | | |||||
| | | | | | | | | | | | |
| ||||||||||||
Long-Term Incentive Compensation | | | Motivates and rewards long term corporate performance as well as the Executive's contribution to achieving our | | | Each year, the Committee establishes the The PSUs vest based on continued service (except for retirees, when they vest over time) and meeting financial objectives over a three year period (with each three year period treated as a "Performance Cycle"). The PSUs granted in The PSUs granted in | | |||||
| | | | | | | | | | | | |
| | | | |
| | | | |
| | | | | | | | | | | | |
| Compensation Component | | | Objective | | | Description and | | ||||
---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | |
| Benefits | | | Protects against catastrophic expenses and provides retirement savings opportunities. | | | Named Executive Officers participate in most of the same benefit plans as the Company's other U.S. based employees, including health, life, disability income, vision and dental insurance, an employee stock purchase plan, 401(k) plan and pension plan. Executives also participate in | | ||||
| | | | | | | | | | | | |
| Perquisites | | | Modest | | | Executives are eligible for one physical examination per year, business spousal travel and gifts of nominal value given to all sales conference attendees. | | ||||
| | | | | | | | | | | | |
| Termination Benefits | | | Provides temporary income following an Executive's involuntary termination of employment, and, in the case of a change of control; helps ensure the continuity of management through the transition. | | | Refer to pages | | ||||
| | | | | | | | | | | | |
How We Make Compensation Decisions
Human Resources Committee Involvement
The Human Resources Committee oversees
CookCompensation Advisory Partners advises the Committee on the Executive compensation program. Cookprogram and also advises the Nominating and Governance Committee on compensation for nonemployeenon employee Directors (see pages 17-19)21-23). CookCompensation Advisory Partners receives compensation from the Company only for its work in advising these Committees. CookCompensation Advisory Partners does not and would not be allowed to perform services for management. The Committee assessed the independence factors in applicable SEC rules and NYSENasdaq Listing Standards and other facts and circumstances and concluded that the services performed by CookCompensation Advisory Partners did not raise any conflict of interest.
No member of management, including the CEO, has a role in determining his or her own compensation; and the CEO is not present when the Committee discusses his compensation. The Committee consults with the 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.
| | | | |
| | | | 2019 Proxy Statement 29 |
Each year the CEO, with input from the Human Resources Department and Cook,the compensation consultant, recommends the amount of base salary increase (if any), annual incentive award and the long termlong-term incentive award for Executives other than himself. These recommendations are based on the Executive's performance, performance of the business areas for which the Executive is responsible (if applicable) and other considerations such as retention. The Human Resources Committee reviews these recommendations and approves compensation decisions for Executives.
No member of management, including the CEO, has a role in determining his or her own compensation. The Human Resources Committee consults with the other independent Directors regarding the CEO's performance and then determines the compensation earned by the CEO for the current year and the CEO's compensation opportunity for the following year.
The role of the Independent Compensation Consultant & Interaction with Management
The Human Resources Committee has the sole authority to hire, approve the compensation of and terminate the engagement of the compensation consultant.
CookThe compensation consultant usually conducts a comprehensive review of the Company's Executive compensation program every other year. In the years in which Cookthe compensation consultant 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.
the compensation consultant. A review of executive compensation was conducted in 2018. The comprehensive study was undertakenof Executive Compensation conducted by Cook in 2015 which influenced the Committee's decisions for the 2016 executive compensation program. The study reviewedconsultant reviews all aspects of the design and structure of the Company's total Executive compensation program, and included:includes:
Cook also:The compensation consultant:
Use of Compensation Data
The Committee reviews the Peer Group of companies it uses to compare Executive compensation as part of Cook'sthe compensation consultant's biennial study. CookThe compensation consultant recommends an appropriate Peer Group of public, similarly sized, diversified financial services, insurance and asset management companies, taking into accountconsidering 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 Principal. Principal targets compensation for the Named Executive Officers at the median of the compensation of the named executive officers at the Peer Group companies. As a resultThe companies in the Peer Group were reviewed in 2018 as part of the most recentcompensation review a decision was made to omit Hartford Financial Services due to its business mix and Janus Capital GroupEaton Vance and StanCorp FinancialLegg Mason were removed as they are muchsmaller relative to Principal based on revenue market capitalization and/or operating income. Unum Group was added because it is only slightly smaller than Principal. Voya Financial was added, asPrincipal
| | | | |
30 2019 Proxy Statement | | | | |
and it is similar in size and has a similar business mix as Principal.lines. The companies in the Peer Group used in Cook's 2015 analysesCompensation Advisory Partners' 2018 analysis to assist in decisions on 20162019 compensation were:
| | | | | | |
| |
| |
| | |
| | | ||||
| • Ameriprise Financial | | •
| |
| |
| | • Lincoln National | | •
| ||
Franklin Resources | | |||||
| • ManuLife | | •
| | ||
| • MetLife | | • T. Rowe Price | | ||
| • Prudential Financial | | | |||
| • Sun Life Financial | | | |||
| • Unum Group | | | |||
| • Voya Financial | | | |||
| | | | | | |
The Committee also uses annual data from third party industry surveys for its compensation decisions.(2)(4) Further, everyEvery 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 evaluatingfor our broad based employee benefit programs. Benefit programs are also compared against those of local employers in Des Moines, Iowa due toas the Company'sCompany has a significant employee population there.
Each year, the Committee reviews the total compensation paid to the Executives by reviewing tally sheets, which include:
The Committee uses this information to analyze the value of compensation actually delivered versus the compensation opportunities established by the Committee, and it is also used in making compensation and compensation plan design decisions. The Committee did not make any changes to the Executive compensation program in 2015 because it continues to meet the Company's objectives.
20152018 Executive Compensation Decisions
In general, Principal's pay philosophy is to target the market median of the Peer Group for executive's total compensation, with actual compensation varying based on performance and tenure.
The Committee made compensation decisions for the Named Executive Officers based on:
The Committee also considers the tax and accounting consequences of each element of compensation, and triescompensation. For taxable years through 2017, the Committee tried to maximize the tax deductibility to Principal of compensation under available exceptions to the application of Section 162(m) of the Internal Revenue Code ("Tax Code")., while simultaneously providing competitive compensation that enhanced our business objectives. This Tax Code section limits Principal from deducting annual compensation exceeding $1,000,000$1 million for our CEO and the three other most highly paid Named Executive Officers (other thanpersons who either are or beginning in 2018, were required to be named in our CFO) who are in office on the last day of the fiscalpublic company disclosure for any year after 2017 ("Covered Employees"). There isFor taxable years prior to 2018, there was an exception to this rule162(m) limitation for performance based compensation.compensation meeting certain criteria, but this exception has generally been repealed for taxable years after 2017 (subject to certain limited grandfathering of compensation payable pursuant to binding written agreements outstanding on November 2, 2017). The Committee may provideconsiders the impact of this change in the applicable federal income tax laws as it makes and implements decisions regarding compensation to Covered Employees that is not deductible if it determines,will be
| | | | |
| | | | 2019 Proxy Statement |
payable after 2017. Tax deductibility affects the net cost of the compensation payable by Principal to Covered Employees, and is one factor to be considered in designing competitive and effective compensation programs. Other factors, such as the need to provide our senior executives compensation that is competitive with that payable in the marketplace, that retains their services and that provides appropriate incentives to achieve our business plans and objectives, may cause the Committee to continue to provide compensation opportunities that are generally consistent with those previously provided, despite the probability that at least some of the compensation payable to some or all of the Covered Employees will not be tax deductible after 2017.
The chart below shows the 20152018 target total compensation for our Named Executive Officers as well as the proportion of their compensation tied to Company performance. The majority ofMost compensation paid to our Named Executive Officer'sOfficers is variable and at risk as reflected in the chart below.
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 and work experience, the importance of the position to the Company and how difficult it would be to replace the Executive. The table below provides the historical base salaries(1) of the Named Executive Officers.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| | Named Executive Officer | | | | 2013(1) | | | | 2014 | | | | 2015 | | | | Percent Increase 2014 to 2015 | | | | Named Executive Officer | | | | 2016 | | | | 2017 | | | | 2018 | | | | Percent Increase 2017 to 2018 | | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| | Zimpleman | | | | $ | 925,000 | | | | $ | 1,000,000 | | | | $ | 1,000,000 | | | | 0% | | | | Houston | | | | $ | 800,000 | | | | $ | 900,000 | | | | $ | 900,000 | | | | 0.0% | | | ||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| Houston | | | $ | 572,000 | | | $ | 675,000 | | | $ | 775,000 | | | 14.8%(2) | | | Strable-Soethout | | | $ | 535,000 | | | $ | 562,000 | | | $ | 595,500 | | | 6.0% | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| | Dunbar | | | | — | | | | — | | | | $ | 473,000 | | | | 5.4% | | | | Dunbar(2) | | | | $ | 492,000 | | | | $ | 507,000 | | | | $ | 600,000 | | | | 18.3% | | | ||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| Lillis | | | $ | 500,000 | | | $ | 530,000 | | | $ | 551,000 | | | 3.9% | | | Halter | | | | | | | $ | 575,000 | | | | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| | McCaughan | | | | $ | 615,000 | | | | $ | 634,000 | | | | $ | 653,000 | | | | 3.0% | | | | McCaughan | | | | $ | 666,000 | | | | $ | 679,500 | | | | $ | 693,000 | | | | 2.0% | | | ||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||
| Valdés | | | $ | 546,000 | | | $ | 563,000 | | | $ | 580,000 | | | 3.0% | | | Valdés | | | $ | 591,500 | | | $ | 603,500 | | | $ | 615,500 | | | 2.0% | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
32 2019 Proxy Statement | | | | |
TheFrom 2004 through 2018, Named Executive Officers may earnearned annual cash bonuses under the Principal Financial Group, Inc. Annual Incentive Plan. This plan was approved by shareholders in 2004, and, compliesas adopted was designed to comply with the performance based exception to Section162(m) of the Tax Code, sosuch that these incentives payable to Named Executive Officers are considered performance based and are therefore fullycould be tax deductible to the Company.
The maximum aggregate bonus amount available under the Annual Incentive Plan for any calendar year for the Named Executive Officers is 2% of annual operating income for that year ("Bonus Pool"). For 2015,2018, the maximum bonuses were:
| | | | | | | | | | | | | ||||||
| | Named Executive Officer | | | | Maximum Award as Percentage of the Annual Incentive Pool | | | | Maximum Potential Award Payment | | | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | ||||||
| | CEO (Houston) | | | | 35% | | | | $ | | | ||||||
| | | | | | | | | | | | | ||||||
| Second highest Paid Covered Employee (McCaughan) | | | 25% | | | $ | |||||||||||
| ||||||||||||||||||
| | | | | | | | | | | | | ||||||
| | | | | | | | $7.4 million | | | ||||||||
| | | | | | | | | | | | | ||||||
| Fourth highest Paid Covered Employee (Valdés) | | | 10% | | | $ | | ||||||||||
| | | | | | | | | | | | | ||||||
| | CFO (Strable-Soethout) | | | | 10% | | | | $3.7 million | | | ||||||
| | | | | | | | | | | | |
The Committee sets the target and maximum annual incentive awards for each Named Executive Officer. The Committee may 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 | | | | 2013 | | | | 2014 | | | | 2015 | | | | Named Executive Officer | | | | 2016 | | | | 2017 | | | | 2018 | | | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||
| | Zimpleman | | | | | 175 | % | | | | | 200 | % | | | | 200% | | | | Houston | | | | | 350 | % | | | | | 350 | % | | | | 350% | | | ||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||
| Houston | | | | 125 | % | | | | 200 | % | | | 350%(1) | | | Strable-Soethout | | | | 100 | % | | | | 150 | % | | | 150% | | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||
| | McCaughan | | | | | 300 | % | | | | | 300 | % | | | | 300% | | | | Dunbar(1) | | | | | 80 | % | | | | | 80 | % | | | | 400% | | | ||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||
| Dunbar | | | | — | | | | | — | | | | 70% | | | Halter(2) | | | | | | | | | | | 350% | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||
| | Valdés | | | | | 75 | % | | | | | 75 | % | | | | 75% | | | | McCaughan | | | | | 300 | % | | | | | 400 | % | | | | 400% | | | ||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||
| Lillis | | | | 100 | % | | | | 100 | % | | | 100% | | | Valdés | | | | 75 | % | | | | 100 | % | | | 100% | | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
The CEO's target award opportunity is greater than that of the other Named Executive Officers because Mr. Houston (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, which tend to be higher than target annual incentive opportunities in other industry segments. In establishing the target award opportunity for Messrs. Houston, McCaughan, Dunbar, Halter and Valdés and Lillis,Ms. Strable-Soethout, the Committee considered the median incentive targets for comparable executive positions in the Peer Group companies, as well as the survey data referenced above. The target award opportunity for Mr. McCaughan, Mr. Dunbar and Mr. Halter has increased consistent with market practice for award opportunities for senior executives in asset management, which are higher than target annual incentive opportunities in other industries.
| | | | |
| | | | 2019 Proxy Statement 33 |
The Annual Incentive Plan terminated on December 31, 2018, and going forward, Named Executive Officers will participate in the Principal Financial Group Incentive Pay Plan (PrinPay Plan), the Company's broad-based annual incentive compensation plan for employees. Awards are calculated based on eligible earnings during the plan year. The PrinPay Plan links annual incentive pay to individual employee results and overall company performance and profitability. Annual financial and non-financial goals for company performance and individual performance are set. After establishing the company score, an employee's individual goal performance is used to determine the individual score an employee receives. The corporate component emphasizes the importance of overall corporate results and includes non-GAAP operating earnings and a variety of other financial and non-financial metrics. The Human Resources Committee may also consider factors that could not have been anticipated when corporate goals were established and adjust the score up or down.
Performance Goal Setting and Measurement Process
September:The Board meets each September to review the Company's long termlong-term strategy. In November, the
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.
February: 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 prior year end financial results. All employees develop individual performance goals with their leaders that support the Company's goals.
Following the completion of fiscal 2015, theThe Committee reviewed 20152018 performance on several key financial measures and on corporate and divisional goals to determine the 20152018 annual bonus for the Named Executive Officers.Officers under the Annual Incentive Plan. 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. In determining corporate performance for 2018, the Committee reviewed Company achievements on these key financial goals:
| | | | |
34 2019 Proxy Statement | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Goal | | | 2018 Assessment | | | ||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 1. | | Achieve appropriate Non-GAAP Operating Earnings and earnings per share. | | | For 2018, the target for Non-GAAP Operating Earnings(1) was $1,675M and the target for Non-GAAP Operating Earnings per diluted share was $5.71. 2018 Non-GAAP Operating Earnings were $1,598M and Non-GAAP Operating Earnings per share(1) was $5.53. | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2. | | Capital—Ensure sufficient capital and liquidity to maintain strong financial strength ratings relative to peers and to be able to execute upon our strategy. | | | All capital and liquidity measures are within target ranges. | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 3. | | Investments—Take actions to invest in optimal assets on a risk-adjusted basis. Acquire assets during the year in alignment with the Tactical Asset Allocation. | | | a) b) | | Achieved a 17 basis point spread on acquired assets, above the target range. 2018 bond and commercial mortgage loan credit losses were $28.2M, below the estimated ranges. | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 4. | | Minimize credit loss. | | | Assets acquired during the year aligned with the Company's Tactical Asset Allocation plan for the period. The portfolio was managed to contain credit-related losses and impairments within an overall range of 6-9 basis points after-tax. Performance relative to the credit loss goal was better than (below) the desired original range, aided by very strong performance in commercial mortgage losses and a benign overall economic environment. The result continues below long-run pricing assumptions, as appropriate for this time in the credit cycle. | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 5. | | Total Company Revenue/Net Revenue | | | Mr. Houston and Ms. Strable-Soethout had goals for total company revenue and net revenue. The Company had total revenue(2) of $14,425M against a goal of $14,440M and net revenue(2) of $6,093M relative to a goal of $6,045M. In addition, Mr. Valdés had Net Revenue goals specific to the business units they oversee, and Mr. McCaughan and Mr. Halter had an Operating Revenue less Pass-Through Commissions goal for Principal Global Investors: | | |||||||||||||||||||
| | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Named Executive Officer | | | Revenue Goal | | | Revenue Result | | | | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Valdés—Principal International | | | $871M | | | $728M | | | | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Named Executive Officer | | | Operating Revenue less Pass-Through Commission Goal | | | Operating Revenue less Pass-Through Commission Result | | | | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | McCaughan—Principal Global Investors | | | $1,391M | | | $1,571M | | | | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | Halter—Principal Global Investors | | | $1,391M | | | $1,571M | | | | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 6. | | Risk Management. | | | The Company's risk management program remains effective and integrated, and our risk culture is sound. For example, we retained our "strong" ERM rating with Standard & Poors. | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | | | 2019 Proxy Statement |
In determining corporate performance for 2015, the Committee reviewed Company achievements on these key financial goals:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 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 | | | | |||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
Final Annual Incentive Pay Award Determination
The following table shows the annual incentive award for each of the Named Executive Officers whose annual incentive opportunities are determined under the Annual Incentive Plan. Since Mr. Dunbar's annual incentive award was determined under the PrinPay Plan, he is not listed in this table. The column "Reduction from Maximum Award" shows the amount by which the Committee reduced the maximum bonuses to determine the awards paid.
| | | | | | | | | | | | | | | | | | | | | | | |||||||||
Name | | 2015 Salary | | 2015 Target | | Final Award | | % of Target | | Reduction From Maximum Award | | | 2018 Salary | | 2018 Target | | Final Award | | % of Target | | Reduction From Maximum Award | | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | | |||||||||
Houston | | $ | 775,000 | | 350% | (1) | $ | 1,482,000 | | 80% | | | $ | 8,891,300 | | | $ | 900,000 | | 350% | | $ | 2,544,000 | | 81% | | | $ | 10,456,000 | | |
| | | | | | | | | | | | | | | | | | | | | | | |||||||||
Lillis | | $ | 551,000 | | 100% | | $ | 440,000 | | 80% | | | $ | 2,523,800 | | ||||||||||||||||
Strable-Soethout | | $ | 595,500 | | 150% | | $ | 721,000 | | 81% | | | $ | 2,979,000 | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |||||||||
Dunbar | | $ | 473,000 | | 70% | | $ | 278,000 | | 84% | | | $ | 2,685,800 | | ||||||||||||||||
Halter | | $ | 575,000 | | 332% | (1) | $ | 1,623,000 | | 85% | | | $ | 5,777,000 | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | |||||||||
McCaughan | | $ | 653,000 | | 300% | | $ | 1,563,000 | | 80% | | | $ | 5,846,500 | | | $ | 693,000 | | 400% | | $ | 1,713,000 | | 81% | | | $ | 7,587,000 | | |
| | | | | | | | | | | | | | | | | | | | | | | |||||||||
Valdés | | $ | 580,000 | | 75% | | $ | 329,000 | | 76% | | | $ | 5,598,600 | | | $ | 615,500 | | 100% | | $ | 471,000 | | 77% | | | $ | 3,229,000 | | |
| | | | | | | | | | | | | | | | | | | | | | |
Mr. Dunbar received a bonus from the PrinPay Plan. His award was determined by multiplying his eligible earnings by his 2018 pro-rated target of 174%. That number was then multiplied by the corporate score of 85% times his individual performance score of 95%, resulting in an annual incentive award of $766,833.
Executives may defer annual awards into a nonqualified supplemental savings plan ("the Excess Plan"),Plan, as illustrated in the footnote to the Non Equity Incentive Compensation column of the Summary Compensation Table, on pages 36-38.41-43.
Long termLong-term Incentive Compensation
The long termlong-term incentive compensation program is designed to align the interests of Executives and shareholders. The compensation the Executives receive reflects the degree to which multiyear financial objectives are achieved and shareholder value is increased. The long termlong-term focus of the compensation programs supports the Company's businesses, infor which long termlong-term performance is critical, such as retirement products, life insurance and asset management. The long termlong-term incentive compensation program also encourages collaboration among Executives in pursuing corporate wide goals.
The Committee establishes a target long termlong-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 granted 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.
2015 Long Term Incentive Target & Grant (as % of base salary) | ||||||||
---|---|---|---|---|---|---|---|---|
2018 Long-Term Incentive Target & Grant (as % of base salary) | 2018 Long-Term Incentive Target & Grant (as % of base salary) | |||||||
| | | | | | | | |
Named Executive Officer | | Target % | | Award Granted | | Target % | | Award Granted |
| | | | | | | | |
Zimpleman | | 600% | | 600% | ||||
| | | | | ||||
Houston | | 425% | | 425% | | 750% | | 750% |
| | | | | | | | |
Lillis | | 275% | | 300% | ||||
Strable-Soethout | | 275% | | 275% | ||||
| | | | | | | | |
Dunbar | | 175% | | 225% | ||||
Dunbar(1) | | 175% | | 225% | ||||
| | | | | ||||
Halter(2) | | 275% | | 280% | ||||
| | | | | | | | |
McCaughan | | 350% | | 325% | | 350% | | 350% |
| | | | | | | | |
Valdés | | 225% | | 250% | | 225% | | 250% |
| | | | | | | | |
| | | | |
36 2019 Proxy Statement | | | | |
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 was CEO and had overall responsibility for the Company.
Executives' long termlong-term compensation is awarded in the form ofprovided as non-qualified stock options and PSUs, which each represent 50% of the total 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 termlong-term incentive program because options are an effective way to link an Executive's compensation to changes in shareholder value. The weighting is not based on a specific formula or algorithm but ratherand 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. Mr. Halter was a Senior Vice President when long-term compensation was awarded in February 2018. His long-term compensation was provided as non-qualified stock options (35% of the total grant date fair value), PSUs (40% of the total grant date fair value) and RSUs (25% of the total grant date fair value). Beginning in 2019, Mr. Halter's long-term compensation will be provided as non-qualified stock options and PSUs, each representing 50% of the grant date fair value.
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 20152018 PSUs, the performance threshold is met if either of the following goals is met:
If either the ROE or OI objective is met or exceeded, the number of units earned is determined using two performance measures, each weighted 50%, to determine the percentage of target PSUs actually earned.
Book Value per Share(7) threshold tied to ROE performance measure:
If the average Book Value per Share is between $40.22 and $44.82, the ROE performance score will be reduced by 50%.
If the average Book Value per Share is below $40.22, the ROE performance score will be reduced to 0%.
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.
2018-2020 PSU Performance Scale | ||||||||
| | | | | | | | |
Performance Level | | Threshold Award | | Target Award | | Maximum Award (150% of Target) | | |
---|---|---|---|---|---|---|---|---|
| | | | | | | | |
Payout (% of Target)(1) | | 50% | | 100% | | 150% | | |
| | | | | | | | |
Average ROE | | 7.1% | | 14.4% | | 18.7% | | |
| | | | | | | | |
Average Pre-tax RONR | | 29.6% | | 34.8% | | 40.0% | | |
| | | | | | | | |
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 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 Principal Executives are determined by the Committee at its February meeting which occurs following the release of the prior year's 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,
| | | | |
| | | | 2019 Proxy Statement 37 |
the grant date for all stock options and other stock based awards shall never be earlier than the date of approval, and shall be:
Authority of the CEO to Grant Equity Awards:
Under the 2014 Stock Incentive Plan, the Committee has delegated authority to the CEO to make certain equity awards to sales agents and non Executive employees for new hires, promotions, retention and recognizing superior
performance. The Committee receives a report on these grants at the next regular Committee meeting. The total awards granted by the CEO may not exceed 250,000 shares per year.
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.Messrs. Dunbar and Halter and McCaughan) a non-qualifiednonqualified defined contribution plan ("Excess plan"Plan") and a defined benefit non-qualifiednonqualified retirement plan ("NQDB"). These benefits are offered to attract and retain talent and provide long termlong-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 41-4346-49 provides additional information about the NQDB and the qualified pension plan. Principal Life maintains the Excess Plan to help attract and retain Executives by allowing Executives to save for retirement and to provide matching contributions on those savings, without regard to the limitations imposed by the Tax Code on 401(k) plans. The narrative to the Non-QualifiedNon Qualified Deferred Compensation Table on pages 44-45page 47 provides additional information about the Excess Plan.
The value of the retirement and savings plans for NonGrandfathered Participants (see page 42)47) 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 defined benefit pension plan for Grandfathered Choice Participants (see page 41)46) 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 Company 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 Principal and its shareholders to:
For these reasons, Principal has entered into "ChangeChange of Control"Control Employment Agreements with each of the Executives. These agreements would help the Executives more fairly evaluate a potential acquisition of Principal, particularly when the acquisition would result in termination of the Executive's employment. These Change of Control Employment 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.
| | | | |
38 2019 Proxy Statement | | | | |
All benefits provided to the Executives upon a Change of Control are paid after both a Change of Control and qualifying termination of employment have occurred (sometimes referred to as a "double trigger")double trigger), except that the
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. These agreements do not provide excise tax gross ups. See pages 46-4852-54 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 Principal requests additional covenants from the Executives.
Executives are offered one physical examination per year 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.
Executives are required to own stock in Principal to ensure their interests are aligned with the shareholders' interests and with the long termlong-term performance of Principal. Once the Executive achieves the required stock ownership level based on market value.value, the ownership requirement remains at the number of shares owned at the time, regardless of subsequent changes in stock price or salary. 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 termlong-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 RSUs or earn out of performance shares. Effective January 1, 2019, ownership requriements increased from 5 times to 7 times base salary for the Chairman and 3 times to 4 times base salary for Division Presidents and Executive Vice Presidents. Executives must meet the new requirements within five years of the date of the change. The percentage of net profit shares that must be retained until the multiple of salary guidelinesownership requirements are met are shown below:
| | | | | |||||
Executive Level | | Retention Ratio | | Multiple of Base Salary | |||||
---|---|---|---|---|---|---|---|---|---|
| | | | | |||||
Chairman | |||||||||
| | 75% | | ||||||
| | | | | |||||
Division Presidents & Executive Vice Presidents | | 50% | | ||||||
| | | | |
All Named Executive Officers comply with these guidelines.
The Committee has also adopted a compensation recovery policy that applies to Executives. Principal can recover incentive compensation if the amount of the compensation was based on achievement of financial results that were subsequently restated if the Committee decides that the Executive engaged in fraud or intentional misconduct that caused the restatement of the Company's financial statements, and thatif the amount of the Executive's incentive compensation or equity award would have been lower had the financial results been properly reported. Principal can also cancel or recover incentive compensation, received in the event of either reputational or financial harm to the Company that arises directly or indirectly from an Executive's misconduct, gross negligence, misfeasance or nonfeasance.
Principal prohibits Directors and employees, including Executives, from:
| | | | |
| | | | 2019 Proxy Statement 39 |
The Human Resources Committee, the CEO and the head of Human Resources have an ongoing focus on executive development and succession planning to prepare Principal for future success. In addition to preparing for CEO succession, the succession planning process includes 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. CEO 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.
Betsy J. Bernard, Chair
Michael T. Dan ChairGary E. Costley
C. Daniel GelattRogerScott M. Mills
Diane C. HochschildNordin
Elizabeth E. Tallett
Risk Assessment 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 the plans are reasonably likely to have a material 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. Principal prohibits employeesEmployees are prohibited from purchasing Principalthe Company's 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, Principalthe Company has determined that the Company'sits 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 Principal.
| | | | |
40 2019 Proxy Statement | | | | |
The following table sets forth the compensation paid to the Named Executive Officers for services provided to the Company and its subsidiaries during 2013, 20142016, 2017 and 2015.2018.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||
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) | 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 | | 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 | | 2018 | $ | 900,000 | $ | 0 | $ | 3,375,009 | $ | 3,375,034 | $ | 2,544,000 | $ | 1,762,655 | $ | 270,319 | $ | 12,227,017 | |||||||||||||||||||||
| 2014 | $ | 592,769 | $ | 0 | $ | 1,115,627 | $ | 1,115,643 | $ | 962,000 | $ | 1,579,560 | $ | 106,984 | $ | 5,472,583 | 2017 | $ | 880,769 | $ | 0 | $ | 2,474,976 | $ | 2,475,016 | $ | 3,339,000 | $ | 2,552,608 | $ | 236,367 | $ | 11,958,736 | ||||||||||||||||||||||
2013 | $ | 566,923 | $ | 0 | $ | 1,072,505 | $ | 1,072,513 | $ | 858,000 | $ | 0 | $ | 79,460 | $ | 3,649,400 | | 2016 | $ | 795,192 | $ | 0 | $ | 2,000,017 | $ | 1,999,983 | $ | 2,744,000 | $ | 1,269,557 | $ | 161,959 | $ | 8,970,708 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||
Lillis | | 2015 | $ | 567,346 | $ | 0 | $ | 826,516 | $ | 826,496 | $ | 440,000 | $ | 0 | $ | 51,482 | $ | 2,711,840 | ||||||||||||||||||||||||||||||||||||||
Strable-Soethout | 2018 | $ | 589,058 | $ | 0 | $ | 818,816 | $ | 818,829 | $ | 721,000 | $ | 411,396 | $ | 94,732 | $ | 3,453,831 | |||||||||||||||||||||||||||||||||||||||
2014 | $ | 523,077 | $ | 0 | $ | 795,004 | $ | 794,986 | $ | 604,000 | $ | 2,921,717 | $ | 47,410 | $ | 5,686,194 | | 2017 | $ | 556,808 | $ | 0 | $ | 772,759 | $ | 772,772 | $ | 938,000 | $ | 689,264 | $ | 62,971 | $ | 3,792,574 | ||||||||||||||||||||||
| 2013 | $ | 494,231 | $ | 0 | $ | 750,001 | $ | 749,982 | $ | 630,000 | $ | 811,848 | $ | 42,651 | $ | 3,478,713 | 2016 | $ | 488,846 | $ | 0 | $ | 606,266 | $ | 606,236 | $ | 446,000 | $ | 337,492 | $ | 50,084 | $ | 2,534,924 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||
Dunbar | | 2018 | $ | 545,769 | $ | 0 | $ | 599,045 | $ | 599,049 | $ | 766,833 | $ | 0 | $ | 53,727 | $ | 2,564,423 | ||||||||||||||||||||||||||||||||||||||
2017 | $ | 507,000 | $ | 0 | $ | 633,764 | $ | 633,757 | $ | 427,490 | $ | 615,214 | $ | 50,148 | $ | 2,867,373 | ||||||||||||||||||||||||||||||||||||||||
| 2016 | $ | 492,000 | $ | 0 | $ | 615,013 | $ | 615,013 | $ | 382,863 | $ | 658,381 | $ | 45,748 | $ | 2,809,018 | |||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||||||
Halter | 2018 | $ | 544,115 | $ | 0 | $ | 974,607 | $ | 524,799 | $ | 1,623,000 | $ | 0 | $ | 13,875 | $ | 3,680,396 | |||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||
McCaughan | 2015 | $ | 673,731 | $ | 0 | $ | 1,061,145 | $ | 1,061,134 | $ | 1,563,000 | $ | 46,816 | $ | 13,702 | $ | 4,419,528 | | 2018 | $ | 530,481 | $ | 0 | $ | 1,212,741 | $ | 1,212,725 | $ | 1,713,000 | $ | 15,304 | $ | 3,483,778 | $ | 8,168,029 | |||||||||||||||||||||
| 2014 | $ | 629,616 | $ | 0 | $ | 3,030,265 | $ | 1,030,261 | $ | 2,060,000 | $ | 123,802 | $ | 13,221 | $ | 6,887,165 | 2017 | $ | 676,904 | $ | 0 | $ | 1,189,116 | $ | 1,189,128 | $ | 2,881,000 | $ | 84,047 | $ | 13,682 | $ | 6,033,877 | ||||||||||||||||||||||
2013 | $ | 611,539 | $ | 0 | $ | 999,377 | $ | 999,379 | $ | 2,325,000 | $ | 80,742 | $ | 13,290 | $ | 5,029,326 | | 2016 | $ | 663,500 | $ | 0 | $ | 1,082,263 | $ | 1,082,253 | $ | 1,958,000 | $ | 73,538 | $ | 13,500 | $ | 4,873,054 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||
Valdés | | 2015 | $ | 598,385 | $ | 0 | $ | 724,984 | $ | 724,959 | $ | 329,000 | $ | 113,838 | $ | 68,003 | $ | 2,559,169 | 2018 | $ | 613,192 | $ | 0 | $ | 769,360 | $ | 769,379 | $ | 471,000 | $ | 143,110 | $ | 92,762 | $ | 2,858,802 | |||||||||||||||||||||
2014 | $ | 559,077 | $ | 0 | $ | 1,703,763 | $ | 703,747 | $ | 481,000 | $ | 143,136 | $ | 75,211 | $ | 3,665,934 | | 2017 | $ | 601,192 | $ | 0 | $ | 754,364 | $ | 754,400 | $ | 640,000 | $ | 148,847 | $ | 76,994 | $ | 2,975,797 | ||||||||||||||||||||||
| 2013 | $ | 541,154 | $ | 0 | $ | 641,538 | $ | 641,536 | $ | 467,000 | $ | 90,767 | $ | 63,008 | $ | 2,445,003 | 2016 | $ | 589,288 | $ | 0 | $ | 739,376 | $ | 739,396 | $ | 413,000 | $ | 112,356 | $ | 74,761 | $ | 2,668,177 | ||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |||
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 | | | $ | 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 | |
| | | | | | | | |
| | | | | | | | | ||||||
| Named Executive Officer | | 401(k) Employee Contribution | | Excess Plan Employee Contributions | | Total Employee Contributions | | ||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | ||||||
| Houston | | | $ | 19,346 | | | $ | 72,000 | | | $ | 91,346 | |
| | | | | | | | | ||||||
| Strable-Soethout | | | $ | 18,500 | | | $ | 58,906 | | | $ | 77,406 | |
| | | | | | | | | ||||||
| Dunbar | | | $ | 24,269 | | | $ | 27,289 | | | $ | 51,558 | |
| | | | | | | | | ||||||
| Halter | | | $ | 14,077 | | | $ | 0 | | | $ | 14,077 | |
| | | | | | | | | ||||||
| McCaughan | | | $ | 18,500 | | | $ | 0 | | | $ | 18,500 | |
| | | | | | | | | ||||||
| Valdés | | | $ | 24,106 | | | $ | 36,791 | | | $ | 60,897 | |
| | | | | | | | |
| | | | | | | | | | | | | |||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | |||||
| 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% | | |||
| | | | | | | | | | | | |
| | | | | | | | | | | | | |||||
| Grant Date | | Exercise Price | | Volatility | | Expected Term | | Dividend Yield | | Risk Free Interest Rate | | |||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | |||||
| February 22, 2016 | | | $ | 37.38 | | 31.67% | | 6.5 years | | 4.066% | | 1.47% | | |||
| | | | | | | | | | | | | |||||
| February 27, 2017 | | | $ | 62.78 | | 27.65% | | 7.0 years | | 2.867% | | 2.18% | | |||
| | | | | | | | | | | | | |||||
| February 26, 2018 | | | $ | 63.98 | | 26.00% | | 7.0 years | | 3.188% | | 2.77% | | |||
| | | | | | | | | | | | |
| | | | |
| | | | 2019 Proxy Statement 41 |
PSUs granted in 20152018 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 | | Amount by Which Aggregate Grant Date Values Reported Would be Increased | | ||||
| Named Executive Officer | | Amount by Which Aggregate Grant Date Values Reported Would be Increased | | | | | | ||||
| | | | | Houston | | | $ | 1,687,504 | | ||
| Zimpleman | | | $ | 1,499,991 | | | | | | ||
| | | | | Strable-Soethout | | | $ | 409,408 | | ||
| Houston | | | $ | 530,573 | | | | | | ||
| | | | | Dunbar | | | $ | 299,522 | | ||
| Lillis | | | $ | 717,183 | | | | | | ||
| | | | | Halter | | | $ | 299,874 | | ||
| Dunbar | | | $ | 266,069 | | | | | | ||
| | | | | McCaughan | | | $ | 606,370 | | ||
| McCaughan | | | $ | 362,492 | | | | | | ||
| | | | | Valdés | | | $ | 384,680 | | ||
| 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 | | Employee Contributions on Incentive Pay | | ||
---|---|---|---|---|---|---|
| | | | | ||
| Houston | | | $ | 209,174 | |
| | | | | ||
| Strable-Soethout | | | $ | 360,500 | |
| | | | | ||
| Dunbar | | | $ | 43,787 | |
| | | | | ||
| Halter | | | $ | 0 | |
| | | | | ||
| McCaughan | | | $ | 0 | |
| | | | | ||
| Valdés | | | $ | 38,074 | |
| | | | |
In past proxies,proxy statements, the same actuarial assumptions have been used regardless of whether a Named Executive Officer with a benefit under the traditional pension formula has elected to receive their nonqualified defined benefit (NQDB)NQDB plan distribution in the form of an annuity or as a lump sum payment. Because a different discount rate is used for determining lump sum payments, the company has changed the assumptions used to value the NQDB reflected in the Summary Compensation Table to reflect the Named Executive Officer's elected form of distribution. This is a better reflection of the value of the benefit that will ultimately be paid to the Named Executive Officer.
For Messrs. Houston, LillisDunbar and Dunbar,Halter, the 20152018 Change in Pension Values are ($306,688), ($1,160,093)58,211) and ($378,794)182,357). respectively. For Mr. Houston, the 2013 Change in Pension Value is ($50,354). Pursuant to SEC reporting rules, a negative Change in Pension Value is reported in the Summary Compensation Table as a zero.
| | | | | | | | | |||||
| 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 | |
| | | | | | | | |
| | | | | | | | | | |||||||
Name | | Perquisites & Other Personal Benefits(a) | | Principal Life Contributions to Defined Contribution Plans(b) | | Amount Paid Pursuant to Retirement/ Termination | | Total | | |||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | |||||||
Houston | | | $ | 15,979 | | | $ | 254,340 | | | | | $ | 270,319 | | |
| | | | | | | | | | |||||||
Strable-Soethout | | | $ | 3,108 | | | $ | 91,624 | | | | $ | 94,732 | | ||
| | | | | | | | | | |||||||
Dunbar | | | $ | 2,064 | | | $ | 51,663 | | | | | $ | 53,727 | | |
| | | | | | | | | | |||||||
Halter | | | $ | 0 | | | $ | 13,875 | | | | $ | 13,875 | | ||
| | | | | | | | | | |||||||
McCaughan | | | $ | 4,903 | | | $ | 13,875 | | | $ | 3,465,000 | | $ | 3,483,778 | |
| | | | | | | | | | |||||||
Valdés | | | $ | 21,563 | | | $ | 71,199 | | | | $ | 92,762 | | ||
| | | | | | | | | |
| | | | |
42 2019 Proxy Statement | | | | |
| | | | | | | | | |||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | |||||
| 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 | |
| | | | | | | | |
| | | | | | | | | |||||
| Named Executive Officer | | 401(k) Matching Contribution Made by Principal Life | | Excess Plan Matching Contribution Made by Principal Life | | Total | | |||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | |||||
| Houston | | | $ | 13,875 | | | $ | 240,465 | | $ | 254,340 | |
| | | | | | | | | |||||
| Strable-Soethout | | | $ | 13,875 | | | $ | 77,749 | | $ | 91,624 | |
| | | | | | | | | |||||
| Dunbar | | | $ | 13,875 | | | $ | 37,788 | | $ | 51,663 | |
| | | | | | | | | |||||
| Halter | | | $ | 13,875 | | | $ | 0 | | $ | 13,875 | |
| | | | | | | | | |||||
| McCaughan | | | $ | 13,875 | | | $ | 0 | | $ | 13,875 | |
| | | | | | | | | |||||
| Valdés | | | $ | 13,875 | | | $ | 57,324 | | $ | 71,199 | |
| | | | | | | | |
Grants of Plan Based Awards for Fiscal Year End December 31, 2015
2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
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 | 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) | Date | Threshold | Target | Maximum(1) | Threshold | Target | Maximum | Awards | Awards(3) | Price(4) | Value(5) | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Zimpleman | | | N/A | $ | 2,000,000 | | NA | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||
Houston | | | N/A | $ | 3,150,000 | $ | 12,100,000 | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||
02/23/2015 | 14,611 | 58,445 | 87,668 | $ | 2,999,982 | 02/26/2018 | 13,187 | 52,751 | 79,127 | $ | 3,375,009 | |||||||||||||||||||||||||||||||||||||||||||||
| 02/23/2015 | | | | | | | | | | 146,845 | $ | 51.33 | $ | 3,000,043 | | 02/26/2018 | | | | | | | | | | 227,275 | $ | 63.98 | $ | 3,375,034 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Lillis | N/A | $ | 551,000 | $ | 3,000,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Strable-Soethout | N/A | $ | 893,000 | $ | 3,500,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/23/2015 | | | | | | 4,026 | 16,102 | 24,153 | | | | | $ | 826,516 | | 02/26/2018 | | | | | | 3,200 | 12,798 | 19,197 | | | | | $ | 818,816 | |||||||||||||||||||||||||
02/23/2015 | 40,455 | $ | 51.33 | $ | 826,496 | 02/26/2018 | 55,140 | $ | 63.98 | $ | 818,829 | |||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | �� | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Houston | | | N/A | $ | 1,858,212 | $ | 10,400,000 | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||
Dunbar | | | N/A | $ | 949,638 | $ | 2,848,915 | | | | | | | | | | ||||||||||||||||||||||||||||||||||||||||
02/26/2018 | 2,341 | 9,363 | 14,045 | $ | 599,045 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/26/2018 | | | | | | | | | | 40,340 | $ | 63.98 | $ | 599,049 | |||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||
Halter | N/A | $ | 2,012,500 | $ | 3,500,000 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| 02/26/2018 | | | | | | 2,344 | 9,374 | 14,061 | | | | | $ | 599,749 | |||||||||||||||||||||||||||||||||||||||||
02/23/2015 | 6,986 | 27,944 | 41,916 | $ | 1,434,366 | 02/26/2018 | 5,859 | $ | 374,859 | |||||||||||||||||||||||||||||||||||||||||||||||
| 02/23/2015 | | | | | | | | | | 70,210 | $ | 51.33 | $ | 1,434,390 | | 02/26/2018 | | | | | | | | | | 35,340 | $ | 63.98 | $ | 524,799 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||
McCaughan | N/A | $ | 1,959,000 | $ | 7,400,000 | N/A | $ | 2,772,000 | $ | 8,600,000 | ||||||||||||||||||||||||||||||||||||||||||||||
| 02/23/2015 | | | | | | 5,168 | 20,673 | 31,010 | | | | | $ | 1,061,145 | | 02/26/2018 | | | | | | 4,739 | 18,955 | 28,433 | | | | | $ | 1,212,741 | |||||||||||||||||||||||||
02/23/2015 | 51,940 | $ | 51.33 | $ | 1,061,134 | 02/26/2018 | 81,665 | $ | 63.98 | $ | 1,212,725 | |||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
Valdés | | | N/A | $ | 435,000 | $ | 5,930,000 | | | | | | | | | | | | N/A | $ | 615,500 | $ | 6,900,000 | | | | | | | | | | ||||||||||||||||||||||||
02/23/2015 | 3,531 | 14,124 | 21,186 | $ | 724,985 | 02/26/2018 | 3,006 | 12,025 | 18,038 | $ | 769,360 | |||||||||||||||||||||||||||||||||||||||||||||
| 02/23/2015 | | | | | | | | | | 35,485 | $ | 51.33 | $ | 724,959 | | 02/26/2018 | | | | | | | | | | 51,810 | $ | 63.98 | $ | 769,379 | |||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||
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 | |||||||||||||||||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | | | 2019 Proxy Statement 43 |
Outstanding Equity Awards at Fiscal Year End December 31, 2015
2018
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||
| | | | | 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 | | | | | | | | | | | | | | | | Stock Awards | | |||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| 74,935 | | 0 | | $ | 62.63 | | 02/26/2017 | | | | | | | | | | | | | | | | | | | | | | | | | | Equity Incentive Plan Awards: Market or payout value of Unearned Shares, Units, or Other Rights that have not vested(4) | | |||||||||||||||||||
| 142,985 | | 0 | | $ | 60.10 | | 02/26/2018 | | | | | | | | Option Awards | | | | | | Equity Incentive Plan Awards: Number of Unearned Shares, Units, or Other Rights that have not vested(3) | | |||||||||||||||||||||||||||||||
| 368,615 | | 0 | | $ | 11.07 | | 02/24/2019 | | | | | | | | | | | | | | Market Value of Shares or Units of Stock that Have Not Vested | Equity Incentive Plan Awards: Market or payout value of Unearned Shares, Units, or Other Rights that have not vested(4) | |||||||||||||||||||||||||||||||
| 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 | | |||||||||||||||||||||||||||||||||||
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: Market or payout value of Unearned Shares, Units, or Other Rights that have not vested(4) | | 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) | ||||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||||||||
Houston | | 24,870 | | 0 | | $ | 62.63 | | 02/26/2017 | | | | | | | | 59,060 | | 0 | | | $ | 44.88 | | | 02/24/2024 | | | | | | |||||||||||||||||||||||
| 37,080 | | 0 | | $ | 60.10 | | 02/26/2018 | | | | | | | | | | | | 70,210 | | 0 | | | $ | 51.33 | | | 02/23/2025 | | | | | |||||||||||||||||||||
| 72,350 | | 0 | | $ | 22.21 | | 02/23/2020 | | | | | | | | 149,643 | | 74,822 | | | $ | 37.38 | | | 02/22/2026 | | | | | | 66,985 | | | $ | 3,556,237 | | ||||||||||||||||||
| 50,200 | | 0 | | $ | 34.26 | | 02/28/2021 | | | | | | | | | | | | 53,886 | | 107,774 | | | $ | 62.78 | | | 02/27/2027 | | | | 39,423 | | | $ | 1,741,314 | | ||||||||||||||||
| 81,865 | | 0 | | $ | 27.46 | | 02/27/2022 | | | | | | | | 0 | | 227,275 | | | $ | 63.98 | | | 02/26/2028 | | | | | | 52,751 | | | $ | 2,330,012 | | ||||||||||||||||||
| 59,833 | | 29,917 | | $ | 30.70 | | 02/25/2023 | | | | | | 38,971 | | | $ | 1,752,916 | | |||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||
Strable-Soethout | | 45,360 | | 22,680 | | | $ | 37.38 | | | 02/26/2026 | | | | 20,305 | | | $ | 1,077,970 | | ||||||||||||||||||||||||||||||||||
| 19,686 | | 39,374 | | $ | 44.88 | | 02/24/2024 | | | | 26,281 | | | $ | 1,182,119 | | | 16,825 | | 33,650 | | | $ | 62.78 | | | 02/27/2027 | | | | | | 12,309 | | | $ | 543,288 | | |||||||||||||||
| 0 | | 70,210 | | $ | 51.33 | | 02/23/2025 | | | | | | 28,809 | | | $ | 1,295,829 | | | 0 | | 55,140 | | | $ | 63.98 | | | 02/67/2028 | | | | 12,798 | | | $ | 565,288 | | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||
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 | | |||||||||||||||||||||||||||||||||||||
Dunbar | | 46,016 | | 23,009 | | | $ | 37.38 | | | 02/26/2026 | | | | | | 20,598 | | | $ | 1,093,557 | | ||||||||||||||||||||||||||||||||
| 14,028 | | 28,057 | | $ | 44.88 | | 02/24/2024 | | | | | | 18,728 | | | $ | 842,385 | | | 13,799 | | 27,596 | | | $ | 62.78 | | | 02/27/2027 | | | | 10,095 | | | $ | 445,896 | | |||||||||||||||
| 0 | | 40,455 | | $ | 51.33 | | 02/23/2025 | | | | 16,600 | | | $ | 746,668 | | | 0 | | 40,340 | | | $ | 63.98 | | | 02/26/2028 | | | | | | 9,363 | | | $ | 413,564 | | |||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||
Halter | | 0 | | 35,340 | | | $ | 63.98 | | | 02/26/2028 | | | | 9,374 | | | $ | 414,050 | | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||
McCaughan | | 15,940 | | 0 | | $ | 49.25 | | 02/27/2016 | | | | | | | | | | | | 54,540 | | 0 | | | $ | 44.88 | | | 02/24/2024 | | | | | | | | | | | ||||||||||||||
| 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 | | | 51,940 | | 0 | | | $ | 51.33 | | | 02/23/2025 | | | | | | | ||||||||||||||||||||
| 18,180 | | 36,360 | | $ | 44.88 | | 02/24/2024 | | | | | | 24,270 | | | $ | 1,091,665 | | | 0 | | 40,489 | | | $ | 37.38 | | | 02/26/2026 | | | | | | 36,247 | | | $ | 1,924,371 | | |||||||||||||
| | | | | 38,486 | | $ | 1,731,100 | | | | | | 25,890 | | 51,780 | | | $ | 62.78 | | | 02/27/2027 | | | | 18,941 | | | $ | 836,624 | | ||||||||||||||||||||||
| 0 | | 51,940 | | $ | 51.33 | | 02/23/2025 | | | | | | 21,313 | | | $ | 958,659 | | | 61,249 | | 0 | | | $ | 63.98 | | | 02/26/2028 | | | | | | 14,216 | | | $ | 627,921 | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||||||
Valdés | | 7,480 | | 0 | | $ | 62.63 | | 02/26/2017 | | | | | | | | 11,829 | | 0 | | | $ | 51.33 | | | 02/23/2025 | | | | | | | ||||||||||||||||||||||
| 10,375 | | 0 | | $ | 60.10 | | 02/26/2018 | | | | | | | | | | | | 0 | | 27,661 | | | $ | 37.38 | | | 02/26/2026 | | | | | | 24,763 | | | $ | 1,314,657 | | ||||||||||||||
| 18,390 | | 0 | | $ | 34.26 | | 02/28/2021 | | | | | | | | 16,425 | | 32,850 | | | $ | 62.78 | | | 02/27/2027 | | | | 12,016 | | | $ | 530,747 | | ||||||||||||||||||||
| 35,790 | | 17,895 | | $ | 30.70 | | 02/25/2023 | | | | | | 23,311 | | | $ | 1,048,529 | | | 0 | | 51,810 | | | $ | 63.98 | | | 02/26/2028 | | | | | | 12,025 | | | $ | 531,144 | | |||||||||||||
| 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 | | ||||||||||||||||||||||||||||||||||
| | | | | | | | | | | | | | | | | |
the ROE or operating income threshold performance measure is met as approved by the Human Resources Committee. PSUs granted in 20152018 will vest on December 31, 20172020, 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.
| | | | |
44 2019 Proxy Statement | | | | |
Option Exercises and Stock Vesting
The following table provides information concerning the exercise of stock options and the vesting of RSUs and PSUs during calendar year 20152018 for each Named Executive Officer on an aggregated basis.
| | | | | | | | | | | | | | | | | | | ||||||||||||||
| Option Awards | | Stock Awards | | | 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) | | | 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 | | | | 89,750 | | $ | 3,710,845 | | | 66,985 | | | $ | 4,285,700 | | | ||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||
Lillis | | | 55,085 | | $ | 1,371,202 | | | 27,253 | | $ | 1,018,720 | | |||||||||||||||||||
Strable-Soethout | | | 0 | | 0 | | | 20,305 | | | $ | 1,299,087 | | | ||||||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||
Dunbar | | | 8,275 | | $ | 47,851 | | | 7,849 | | $ | 293,394 | | | | 16,400 | | $ | 737,488 | | | 20,598 | | | $ | 1,317,860 | | | ||||
| | | | | | | | | | |||||||||||||||||||||||
Halter | | | 0 | | 0 | | | 0 | | | 0 | | | |||||||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||
McCaughan | | | 96,958 | | $ | 1,606,164 | | | 36,315 | | $ | 1,357,457 | | | | 164,606 | | $ | 2,316,731 | | | 36,247 | | | $ | 2,319,105 | | | ||||
| | | | | | | | | | | | | | | | | | | ||||||||||||||
Valdés | | | 20,162 | | $ | 364,422 | | | 23,312 | | $ | 871,396 | | | | 27,662 | | $ | 735,809 | | | 24,763 | | | $ | 1,584,323 | | | ||||
| | | | | | | | | | | | | | | | | | |
2018 CEO Pay Ratio
Consistent with Section 953(b) of the Dodd-Frank Wall Street Reform and Consumer Protection Act, and Item 402(u) of Regulation S-K (the pay ratio rule), we are providing the following information about the relationship of the annual total compensation of our median employee and the annual total compensation of our Chief Executive Officer (CEO), Mr. Houston, as of our fiscal year-end December 31, 2018. We believe the pay ratio included in this information is a reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K.
There were no significant changes to our global employee population and our compensation plans remained consistent with the prior year. As such, we do not reasonably believe there have been changes that would result in a significant change to our pay ratio disclosure and, accordingly, are using the same median employee to calculate this year's pay ratio. This employee works in our Des Moines, Iowa office.
We calculated the median employee's annual total compensation in the same manner as the CEO's annual total compensation. In addition to including the value of the Company's 401(k) plan, pension plan, medical benefits, and welfare benefits for purposes of determining the median employee, these amounts also were included in the total annual compensation amounts for purposes of calculating the ratio. This resulted in annual total compensation for the CEO for purposes of determining the ratio in an amount of $12,244,054, which modestly exceeds the amount reported for him in the Summary Compensation Table. The median employee's annual total compensation was $82,872. Based on this information, for 2018 the ratio of the annual total compensation of the CEO to the annual total compensation of the median employee was 148 : 1.
| | | | |
| | | | 2019 Proxy Statement 45 |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Participant Group | | | Pension Benefit Formula | | | 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 | | | 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 Defined Benefit ("DB") Plan and the NQDB and to forego receipt of the additional matching contributions offered under the 401(k) and Excess Plans. | | | Defined Benefit Plan (Traditional Formula) 39.2% of Average Compensation (the highest five consecutive years' total Payout 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 | | | | | | Annual Pay Credit | | |||||||||||||
| | | Age+ Service Years (Points) | | Contribution on All Pay | | Contribution on Pay Above Taxable Wage Base(2) | | | | | Age+ Service Years (Points) | | Contribution on All Pay | | Contribution on Pay Above Taxable Wage Base(2) | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | < 40 | | 4.00% | | 2.00% | | | | | < 40 | | 4.00% | | 2.00% | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 40 – 49 | | 5.50% | | 2.75% | | | | | 40 – 49 | | 5.50% | | 2.75% | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 50 – 59 | | 7.00% | | 3.50% | | | | | 50 – 59 | | 7.00% | | 3.50% | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 60 – 69 | | 9.00% | | 4.50% | | | | | 60 – 69 | | 9.00% | | 4.50% | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 70 – 79 | | 11.50% | | 5.75% | | | | | 70 – 79 | | 11.50% | | 5.75% | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 80 or more | | 14.00% | | 7.00% | | | | | 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. | | | | | 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. | | ||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
46 2019 Proxy Statement | | | | |
| | | | | | | | | | | | | | | | | | | | | | | | |
| Participant Group | | | Pension Benefit Formula | | | 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 | | | 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 Formula—The Annual Pay Credits are calculated using the table below | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Annual Pay Credit | | | | | | Annual Pay Credit | | |||||||||||||
| | | Age+ Service Years (Points) | | Contribution on All Pay | | Contribution on Pay above Taxable Wage Base(2) | | | | | Age+ Service Years (Points) | | Contribution on All Pay | | Contribution on Pay Above Taxable Wage Base(2) | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | < 40 | | 3.00% | | 1.50% | | | | | < 40 | | 3.00% | | 1.50% | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 40 – 59 | | 4.00% | | 2.00% | | | | | 40 – 59 | | 4.00% | | 2.00% | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 60 – 79 | | 5.50% | | 2.75% | | | | | 60 – 79 | | 5.50% | | 2.75% | | |||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | 80 or more | | 7.00% | | 3.5% | | | | | 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. | | |
Mr. Houston andMs. Strable-Soethout earn benefits under the Traditional and Cash Balance Formulas. When benefits begin, they will receive the greater of the benefit under the Traditional Formula or Cash Balance Formula. • Mr. Dunbar most recently earned benefits under the Cash Balance Formula prior to his promotion on September 15, 2018. Mr. Dunbar also has a frozen benefit earned for service prior to January 1, 2010 where he will receive the greater of the Traditional Formula or Cash Balance Formula. • Mr. Halter has not accrued any benefit under this plan since January 1, 2010. When the frozen benefits are payable he will receive the greater of the Traditional Formula of Cash Balance Formula. • Mr. Valdés primary 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. | | | Non Qualified 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. There is a reduction for benefits paid under the Traditional Formula that begin prior to the Named Executive Officers attaining Normal Retirement Age: • 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. | | |||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | |
| | | | |
| | | | 2019 Proxy Statement 47 |
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.
| | | | | | | | | | | | | | | | | |||
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 | | 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 | ||||||||||
Houston | | Qualified Pension | | 34 | | | $ | 1,080,951 | | $0 | |||||||||
| | NQDB | | | | $ | 24,422,262 | | $0 | | NQDB | | | | | $ | 8,263,562 | | $0 |
| | | | | | | | | | | | | | | | | |||
Houston | | Qualified Pension | | 31 | | $ | 799,735 | | $0 | ||||||||||
Strable-Soethout | | Qualified Pension | | 27 | | | $ | 675,616 | | $0 | |||||||||
| NQDB | | | $ | 2,959,958 | | $0 | | NQDB | | | | $ | 1,943,720 | | $0 | |||
| | | | | | | | | | | | | | | | | |||
Lillis | | Qualified Pension | | 33 | | $ | 2,112,923 | | $0 | ||||||||||
Dunbar(3) | | Qualified Pension | | 24 | | | $ | 1,234,559 | | $0 | |||||||||
| | NQDB | | | | $ | 4,992,360 | | $0 | | NQDB | | | | | $ | 2,581,239 | | $0 |
| | | | | | | | | | | | | | | | | |||
Dunbar | | Qualified Pension | | 29 | | $ | 988,056 | | $0 | ||||||||||
Halter | | Qualified Pension | | 26 | | | $ | 838,405 | | $0 | |||||||||
| NQDB | | | $ | 1,602,358 | | $0 | | NQDB | | | | $ | 2,672,384 | | $0 | |||
| | | | | | | | | | | | | | | | | |||
McCaughan | | Qualified Pension | | 7 | | $ | 205,699 | | $0 | | Qualified Pension | | 7 | | | $ | 218,070 | | $3,387 |
| | NQDB | | | | $ | 1,699,619 | | $0 | | NQDB | | | | | $ | 1,856,750 | | $0 |
| | | | | | | | | | | | | | | | | |||
Valdés | | Qualified Pension | | 5 | | $ | 139,421 | | $0 | | Qualified Pension | | 8 | | | $ | 235,574 | | $0 |
| NQDB | | | $ | 289,164 | | $0 | | NQDB | | | | $ | 597,324 | | $0 | |||
| | | | | | | | | | | | | | | | |
Cost of Living 1.50% for December 31, 2017 and December 31, 2018
Mortality: Qualified: Total RP-2006 Rates (baseline from SOA RP-2014);
| | Non-Qualified: White Collar RP-2006 Rates (baseline from SOA RP-2014) | |
| | Improvement: For December 31, 2017, RPEC-2014-v2017 model using historical data through 2015 (graduated data from 2013). For December 31, 2018, RPEC-2014-v2018 model using historical data through 2016 (graduated data from 2014). | |
| | Convergence: 7-year to SSA 2010-2088 improvement scale (SSA Trustees Report 2014) |
Traditional benefits under the qualified DB Plan must be paid as annuity. Under the NQDB Plan, Named Executive Officers may elect whether benefits will be paid as annuity or in a single sum payment. Ms. Strable-Soethout and Messers. Halter, Dunbar and McCaughan have elected their NQDB benefit to be paid as an annuity;
| | | | |
48 2019 Proxy Statement | | | | |
A spouse 3 years younger;Table of Contents
then discounted back to the current age using the annuity basis discount rate with no mortality (Mr. McCaughan's and
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) | | | 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(4) | | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||
Zimpleman | | | $ | 313,154 | | | $ | 91,604 | | $ | –117,418 | | $0 | | $ | 4,137,245 | | |||||||||||||||||||||
| | | | | | | | | | | | |||||||||||||||||||||||||||
Houston | | | $ | 135,806 | | | $ | 88,354 | | $ | –28,416 | | $0 | | $ | 2,158,240 | | | | $ | 339,120 | | | $ | 240,465 | | | $ | (442,966 | ) | | $ | 0 | | | $ | 4,043,947 | |
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||
Lillis | | | $ | 70,281 | | | $ | 28,586 | | $ | –8,294 | | $0 | | $ | 780,348 | | |||||||||||||||||||||
Strable-Soethout | | | $ | 293,406 | | | $ | 77,749 | | | $ | (60,638 | ) | | $ | 0 | | | $ | 1,796,843 | | |||||||||||||||||
| | | | | | | | | | | | |||||||||||||||||||||||||||
Halter | | | $ | 0 | | | $ | 0 | | | $ | (5,929 | ) | | $ | 0 | | | $ | 124,494 | | |||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||
Dunbar | | | $ | 51,876 | | | $ | 34,845 | | $ | –31,685 | | $0 | | $ | 401,333 | | | | $ | 61,488 | | | $ | 37,788 | | | $ | (194,627 | ) | | $ | 0 | | | $ | 714,634 | |
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||
McCaughan | | | $ | 0 | | | $ | 0 | | $ | –201,994 | | $0 | | $ | 2,470,085 | | | | $ | 0 | | | $ | 0 | | | $ | (835,153 | ) | | $ | 0 | | | $ | 2,782,755 | |
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||
Valdés | | | $ | 68,154 | | | $ | 50,470 | | $ | –5,743 | | $0 | | $ | 384,436 | | | | $ | 87,991 | | | $ | 57,324 | | | $ | (45,629 | ) | | $ | 0 | | | $ | 804,162 | |
| | | | | | | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | ||||||||||
Named Executive Officer | | Employee Deferral Prior to 1/1/2015 | | Principal Life Match Prior to 1/1/2015 | | Total | | | Employee Deferral Prior to 1/1/2018 | | Principal Life Match Prior to 1/1/2018 | | Total | | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | ||||||||||
Zimpleman | | | $ | 2,109,171 | | | $ | 556,314 | | $ | 2,665,485 | | ||||||||||||
| | | | | | | | |||||||||||||||||
Houston | | | $ | 750,676 | | | $ | 468,712 | | $ | 1,219,388 | | | | $ | 1,358,639 | | | $ | 884,183 | | $ | 2,242,822 | |
| | | | | | | | | | | | | | | ||||||||||
Lillis | | | $ | 296,305 | | | $ | 136,691 | | $ | 432,996 | | ||||||||||||
Strable-Soethout | | | $ | 901,771 | | | $ | 340,344 | | $ | 1,242,115 | | ||||||||||||
| | | | | | | | | | | | | | | ||||||||||
Dunbar | | | $ | 159,250 | | | $ | 100,594 | | $ | 259, 844 | | | | $ | 154,368 | | | $ | 103,738 | | $ | 258,106 | |
| | | | | | | | |||||||||||||||||
Halter | | | $ | 47,714 | | | $ | 35,785 | | $ | 83,499 | | ||||||||||||
| | | | | | | | | | | | | | | ||||||||||
McCaughan | | | $ | 998,343 | | | $ | 581,568 | | $ | 1,579,911 | | | | $ | 998,343 | | | $ | 581,568 | | $ | 1,579,911 | |
| | | | | | | | | | | | | | | ||||||||||
Valdés | | | $ | 141,929 | | | $ | 101,757 | | $ | 243,686 | | | | $ | 328,372 | | | $ | 240,799 | | $ | 569,171 | |
| | | | | | | | | | | | | | |
| | | | |
| | | | 2019 Proxy Statement 49 |
Qualified 401(k) Plan and Excess Plan
| | | | | | | | | | | | |
| Plan Feature | | | Qualified 401(k) Plan | | | Excess Plan | | ||||
| | | | | | | | | | | | |
| Deferrals | | | 1-15% of base salary and up to 100% of annual incentive compensation awards (1-100% of base pay if not contributing to the Excess Plan) up to the limits imposed by the Tax Code. | | | 1-15% of base salary and up to 100% of annual incentive compensation awards. | | ||||
| | | | | | | | | | | | |
| Investment Options | | | There are 20 investment options and investment and investment | | | 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 | | ||||
| | | | | | | | | | | | |
| | | | |
| | | | |
The following are the investment options available to all participants in the Excess Plan:
| | | | | | | ||
| Investment Option | | 1 Year Rate Of Return (12/31/ | | ||||
| | | | | | | ||
| Principal | | | | ||||
| Principal | | – | | ||||
| | 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 | | – | | | ||
| Principal LifeTime | | – | | ||||
| | Principal LifeTime | | – | | | ||
| Principal LifeTime Hybrid 2030 | | – | | ||||
| | Principal LifeTime | | – | | | ||
| Principal LifeTime | | – | | ||||
| | Principal LifeTime | | – | | | ||
| Principal | | | |||||
| | Principal LifeTime Hybrid 2055 R6 Fund | | –9.82% | | | ||
| Principal LifeTime Hybrid 2060 R6 Fund | | –10.00% | | ||||
| | Principal LifeTime Hybrid 2065 R6 Fund | | –13.13% | | | ||
| Principal LifeTime Hybrid Income R6 Fund | | –2.75% | | ||||
| | Principal Core Plus Bond Institutional Fund | | – | | | ||
| 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 | | – | | | ||
| Principal Select Stable Value Fund | | 0.05% | | ||||
| | | | | | |
Principal had an employment agreement dated May 1, 2008, with Mr. Zimpleman with an initial term through May 1, 2011, and the term of the agreement automatically extended to create a new one year term unless either party provided notice of an intention not to extend the agreement. This agreement terminated on January 4, 2016, upon Mr. Zimpleman's retirement. Mr. Zimpleman was 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 terminated 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, LillisHalter and Valdés and Ms. Strable-Soethout are eligible for severance under the Company's severance plan if they are terminated as a resultbecause of layoffs, position elimination or similar reasons. Executives doThey are not receiveeligible for 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, up to a maximum of the Named Executive Officers would be eligible for 52 weeks of severance under this plan.weeks. 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 Retireeretiree medical plan if the Executive is eligible to retire or COBRA if the Executive is not eligible to
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, LillisDunbar, Halter and Valdés.s and Ms. Strable-Soethout.
An agreement made with Mr. McCaughan when he was hired providesprovided that if he iswere terminated without "Cause", as that term is defined in the Change of Control Employment Agreements (see below), he willwould be paid (i) one
| | | | |
| | | | 2019 Proxy Statement 51 |
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, 2015:2018, except in the case of Mr. McCaughan, for whom the amounts shown are the actual benefits in connection with his retirement effective September 30, 2018:
| | | | | | | | | | | | | | | | | | | ||||||||||||
Named Executive Officer | | Severance | | Outplacement Services | | COBRA Reimbursement | | Total | | | 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 | | | $ | 900,000 | | | $ | 135,000 | | | $ | 5,519 | | $ | 1,040,519 | |
| | | | | | | | | | | | | | | | | | | ||||||||||||
Lillis | | $ | 551,000 | | | $ | 10,500 | | | $ | 2,058 | | $ | 563,558 | | |||||||||||||||
Strable-Soethout | | $ | 595,500 | | | $ | 89,325 | | | $ | 3,012 | | $ | 687,837 | | |||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||
Dunbar | | $ | 473,000 | | | $ | 10,500 | | | $ | 5,101 | | $ | 488,601 | | | $ | 600,000 | | | $ | 90,000 | | | $ | 3,880 | | $ | 693,880 | |
| | | | | | | | | | |||||||||||||||||||||
Halter | | $ | 575,000 | | | $ | 86,250 | | | $ | 5,519 | | $ | 666,769 | | |||||||||||||||
| | | | | | | | | | | | | | | | | | | ||||||||||||
McCaughan | | $ | 2,612,000 | | | $ | 0 | | | $ | 0 | | $ | 2,612,000 | | | $ | 3,465,000 | | | $ | 0 | | | $ | 0 | | $ | 3,465,000 | |
| | | | | | | | | | | | | | | | | | | ||||||||||||
Valdés | | $ | 580,000 | | | $ | 10,500 | | | $ | 7,791 | | $ | 598,291 | | | $ | 615,500 | | | $ | 92,325 | | | $ | 6,927 | | $ | 714,752 | |
| | | | | | | | | | | | | | | | | | |
Change of Control Employment Agreements
Principal has Change of Control Employment Agreements with each of the Named Executive Officers except Mr. Zimpleman, whose agreement terminated upon his retirement on January 4, 2016.currently employed. These Agreements have aan initial term of two years and will automatically renew for successive one year periods unless Principal provides a notice electing not to extend the term. If during the term of these agreements a "Pre-ChangePre Change of Control Event" or a "ChangeChange of Control"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 Tax 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), Principal 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-ChangePre 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-ChangePre Change of Control Event"Event means:
Under these Agreements, a Change of Control means:
These Agreements also provide:
| | | | |
52 2019 Proxy Statement | | | | |
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"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 or she and his or her eligible family members will receive medical, prescription drug, dental, vision, group term life insurance, and accidental death and dismemberment coverages comparable to those received by Executives whose employment continues.
Pursuant to these Agreements, the 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 or
| | | | |
| | | | 2019 Proxy Statement 53 |
she 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.
Potential Payments Upon Termination Related to a Change of Control
The following table describes the potential payments upon involuntary termination without Cause or voluntary termination for Good Reason following a Change of Control. No amounts are shown for Mr. McCaughan, whose employment terminated September 30, 2018. 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) | | | 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 | | | $ | 8,100,000 | | $ | 508,039 | | $ | 6,434,641 | | | $ | 186,110 | | | $ | 0 | | $ | 15,228,790 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||
McCaughan | | $ | 5,224,000 | | $ | 401,720 | | $ | 5,414,827 | | | $ | 48,668 | | | $ | 0 | | $ | 11,089,215 | | |||||||||||||||||||||
Strable-Soethout | | $ | 2,977,500 | | $ | 153,997 | | $ | 1,825,369 | | | $ | 120,582 | | | $ | 0 | | $ | 5,077,448 | | |||||||||||||||||||||
| | | | | | | | | | | | | | |||||||||||||||||||||||||||||
Dunbar | | $ | 6,000,000 | | $ | 156,227 | | $ | 1,586,189 | | | $ | 126,667 | | | $ | 0 | | $ | 7,869,083 | | |||||||||||||||||||||
| | | | | | | | | | | | | | |||||||||||||||||||||||||||||
Halter | | $ | 5,175,000 | | $ | 0 | | $ | 2,306,734 | | | $ | 137,360 | | | $ | 0 | | $ | 7,619,094 | | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||
Valdés | | $ | 2,030,000 | | $ | 258,024 | | $ | 3,314,711 | | | $ | 61,050 | | | $ | 0 | | $ | 5,663,785 | | | $ | 2,462,000 | | $ | 187,823 | | $ | 1,935,574 | | | $ | 143,435 | | | $ | 0 | | $ | 4,728,832 | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | ||||||||||||||||
Dunbar | | $ | 1,608,200 | | $ | 130,436 | | $ | 1,241,700 | | | $ | 61,050 | | | $ | 0 | | $ | 3,041,386 | | |||||||||||||||||||||
| | | | | | | | | | | | | |
| | | | |
| | | | |
Proposal Two—Advisory Vote to Approve Executive Compensation
Say on pay votes will be held annually until the next vote on the frequency of this advisory vote is conducted in 2017, or until the Board determines that a different frequency would be in the best interests of the Company's shareholders.
The Company's Executive compensation program is designed to reward Executives who contribute to the achievement of the Company's business objectives and to attract, retain and motivate talented Executives to perform at the highest level and contribute significantly to the Company's success. The program is designed to tie the delivery of Executive compensation to the achievement of the Company's long and short term financial and strategic goals and to align the interests of Executives and shareholders. The purposes and objectives of, and the rationale behind, the Company's compensation program are described in significant detail in the Compensation Discussion and Analysis, starting on page 21.24. 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 Executive compensation program, values shareholder opinions and will consider the outcome of the vote when making future compensation decisions for the Named Executive Officers.
In 2018, 96%% of shareholders who cast ballots voted to retain an annual advisory vote on Executive Compensation, and the Board approved continuing this practice.
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.
| | | | |
| | | | 2019 Proxy Statement |
Proposal Three—Ratification of Appointment of
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, 2016.2019. 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 accountant for many years prior thereto. The Audit Committee and the Board of Directors believe, after the consideration of a variety of factors, 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, 20162019 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 20152018 consolidated financial statements.
The aggregate fees billed by the Company's independent registered public accounting firm in 20152018 and 20142017 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 $10,352,000$12,079,000 in 20152018 and $8,984,000$11,309,000 in 2014.2017.
The aggregate fees billed by the Company's independent registered public accounting firm in 20152018 and 20142017 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 $1,397,000$1,788,000 in 20152018 and $1,530,000$1,697,000 in 20142017.
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 totaled approximately $88,000$244,000 in 20152018 and $223,000$111,000 in 2014.2017. 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.
The aggregate fees billed by the Company's independent registered public accounting firm did not bill for professional services rendered in connection with other services consisting primarily of software licensing totaled approximately $27,000 in 2015 and $3,000 in 2014.2018 or 2017.
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.affiliates which the Company controls or significantly influences. 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
| | | | |
| | | | |
and fees up to an established individual engagement and annual threshold. The policy requires specific preapproval of all other services. Pursuant to the policy, each quarter Principal 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"Fees," and "All Other Fees"Fees," by utilizing the de minimis exception of SEC Rule 2-01(c)(7)(i)(C).
| | | | |
| | | | 2019 Proxy Statement |
Security Ownership of Certain Beneficial Owners and Management
Except as otherwise indicated below, the following table shows, as of March 14, 2016,15, 2019, 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 | | | Number of Shares Beneficially Owned(1) | | Percent of Common Stock Outstanding | | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | ||||||||
The Vanguard Group(2) | | | 24,297,072 | | | 8.29 | | | | 30,737,191 | | | 10.73 | | ||||
100 Vanguard Boulevard | | | | | | | | | | | ||||||||
| | | | | | | | | | | ||||||||
Wellington Management Group LLP(3) | | | 19,825,898 | | | 6.77 | | |||||||||||
c/o Wellington Management Company LLP | | | | | | |||||||||||||
BlackRock Inc.(3) | | | 18,920,630 | | | 6.70 | | |||||||||||
55 East 52nd Street | | | | | | |||||||||||||
| | | | | | | | | | | ||||||||
Nippon Life Insurance Company(4) | | | 18,137,000 | | | 6.17 | | | | 18,137,000 | | | 6.29 | | ||||
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 | | |||||||||||
Capital Research Global Investors(5) | | | 15,094,996 | | | 5.30 | | |||||||||||
333 South Hope Street | | | | | | | | | | | ||||||||
| | | | | | | | | | | ||||||||
Betsy J. Bernard | | | 33,493 | | | * | | | | 45,285 | | | * | | ||||
| | | | | | | | | | | ||||||||
Jocelyn Carter-Miller | | | 34,080 | | | * | | | | 46,085 | | | * | | ||||
| | | | | | | | | | | ||||||||
Gary E. Costley | | | 35,970 | | | * | | |||||||||||
| | | | | | |||||||||||||
Michael T. Dan | | | 39,378 | | | * | | | | 46,437 | | | * | | ||||
| | | | | | | | | | | ||||||||
Dennis H. Ferro | | | 17,862 | | | * | | |||||||||||
| | | | | | |||||||||||||
C. Daniel Gelatt(7) | | | 368,111 | | | * | | |||||||||||
C. Daniel Gelatt | | | 136,505 | | | * | | |||||||||||
| | | | | | | | | | | ||||||||
Sandra L. Helton | | | 41,092 | | | * | | | | 44,742 | | | * | | ||||
| | | | | | | | | | | ||||||||
Roger C. Hochschild | | | 304 | | | | | | | 8,693 | | | * | | ||||
| | | | | | | | | | | ||||||||
Richard L. Keyser | | | 0 | | | * | | |||||||||||
Scott M. Mills | | | 4,705 | | | * | | |||||||||||
| | | | | | | | | | | ||||||||
Luca Maestri | | | 0 | | | * | | |||||||||||
Diane C. Nordin | | | 1,133 | | | * | | |||||||||||
| | | | | | | | | | | ||||||||
Blair C. Pickerell | | | 0 | | | * | | | | 7,459 | | | * | | ||||
| | | | | | | | | | | ||||||||
Elizabeth E. Tallett | | | 38,750 | | | * | | | | 51,003 | | | * | | ||||
| | | | | | | | | | | ||||||||
Timothy M. Dunbar | | | 148,682 | | | * | | | | 267,448 | | | * | | ||||
| | | | | | | | | | | ||||||||
Patrick G. Halter | | | 84,199 | | | * | | |||||||||||
| | | | | | |||||||||||||
Daniel J. Houston | | | 551,799 | | | * | | | | 721,975 | | | * | | ||||
| | | | | | |||||||||||||
Terrance J. Lillis | | | 254,808 | | | * | | |||||||||||
| | | | | | | | | | | ||||||||
James P. McCaughan | | | 590,875 | | | * | | | | 275,799 | | | * | | ||||
| | | | | | | | | | | ||||||||
Deanna D. Strable-Soethout(6) | | | 344,841 | | | * | | |||||||||||
| | | | | | |||||||||||||
Luis Valdés | | | 207,916 | | | * | | | | 167,489 | | | * | | ||||
| | | | | | | | | | | ||||||||
Larry D. Zimpleman | | | 1,782,143 | | | * | | |||||||||||
All Directors and Executive Officers as a group (22 persons) | | | 3,026,455 | | | 1.09 | | |||||||||||
| | | | | | | | | | | ||||||||
All Directors and Executive Officers as a group (24 persons) | | | 5,170,534 | | | 1.78 | | |||||||||||
| | | | | |
| | | | |
| | | | |
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 13, 2016,14, 2019, pursuant to previously awarded stock options, RSUs, performance share units and nontransferable 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 17-1921-23 for a discussion of the options and RSUs granted to Directors under the Principal Financial Group, Inc. 2014 Directors Stock Plan and the phantom stock units credited to Directors who participate in the Deferred Compensation Plan for Non Employeenonemployee Directors of Principal Financial Group, Inc. See "Compensation Discussion and Analysis" beginning on page 2124 for a discussion of the performance units credited to officers who defer receipt of awards under a long termlong-term performance plan, the options and RSUs granted under the 2014 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 14, 2016,15, 2019, the Directors and Executive Officers named in the security ownership table hold a pecuniary interest in the following number of units: Ms. Bernard, 2,535;2,839; Ms. Carter Miller, 2,535; Dr. Costley, 9,832;2,839; Mr. Dan, 15,133; Mr. Ferro, 18,966;11,717; Dr. Gelatt, 2,535;2,839; Ms. Helton, 2,535;2,839; Mr. Hochschild, 5,404;12,418; Mr. Keyser, 0; Mr. Maestri, 2,582;Mills, 7,375; Ms. Nordin, 2,839; Mr. Pickerell, 1,725;2,839; Ms. Tallett, 8,523;9,997; Mr. Dunbar, 98,992;168,514; Mr. Halter, 142,101; Mr. Houston, 292,292; Mr. Lillis, 136,697;206,881; Mr. McCaughan, 231,909;101,552; Ms. Strable-Soethout, 135,487; and Mr. Valdés, 138,304; and Mr. Zimpleman, 14,232.127,905.
| | | | |
| | | | 2019 Proxy Statement |
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 (Reporting Persons) to file with the SEC and the New York Stock ExchangeNasdaq reports of ownership of the Company's securities and changes in reported ownership. Directors, Executive Officers and greater than ten percent shareholders areReporting Persons required by SEC rules to furnishprovide the Company with copies of all Section 16(a) reports they file.
Based solely on a review of the reports furnishedprovided to the Company or written representations from reporting persons that all reportable transactions were reported,Reporting Persons, the Company believes that during the fiscal year ended December 31, 2015, the Company's Directors, Executive Officers and greater than ten percent owners2018, all Section 16(a) reports were filed on a timely filed all reports they were required to file under Section 16(a),basis except for one report for one Director. Principal discovered that oneMr. McCaughan. Due to an administrative error, a report for Roger C. Hochschildprepared on Mr. McCaughan's behalf was inadvertently not timely filed prior to disclose restricted stock units granted by the Company as director compensation.
Princpal undertakes to prepare Section 16(a) repors on behalf of its Directors and Executive Officers. A lack of communication within the Company caused the report to be inadvertently filed two business days after the two-day filing requirement for Section 16(a) reports.deadline.
| | | | |
| | | | |
Questions and Answers About the
Annual Meeting
Why didn't I receive a copy of the paper proxy materials? |
The Securities and Exchange Commission ("SEC")SEC rules allow companies to deliver a notice of Internet availability ofnotify shareholders that proxy materials are available on the Internet and to shareholders and provide Internet access to those proxy materials. Shareholdersmaterials via the Internet. You may obtain paper copies of the proxy materials free of charge by following the instructions provided in the notice of Internet availability of proxy materials.
Why did I receive notice of and access to this proxy statement? |
The Board of Directors ("Board") is soliciting proxies to be voted at the annual meetingAnnual Meeting of shareholders to be held on May 17, 2016,21, 2019, at 9:00 a.m., Central Daylight Savings Time, at 750 Park711 High Street, Des Moines, Iowa, and at any adjournment or postponement of the meeting ("Annual Meeting").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 givensent to shareholders on April 7, 2016.9, 2019.
What is a proxy? |
It is your legal designation of another person to vote the stock you own. The other person is called a proxy. When you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. Principal has designated three of the Company's officers to act as proxies for the 20162019 Annual Meeting: Timothy M. Dunbar, Executive Vice President and Chief Investment Officer; Terrance J. Lillis,Deanna D. Strable-Soethout, Executive Vice President and Chief Financial Officer; and Karen E. Shaff, Executive Vice President, General Counsel and Secretary.
What will the shareholders vote on at the Annual Meeting? |
Will there be any other items of business on the agenda? |
Principal does not expect any other items of business because the deadline for shareholder proposals and nominations has passed. However, if any other matter should properly come before the meeting, the people authorized by proxy will vote according to their best judgment.
Who can vote at the Annual Meeting? |
Shareholders as of the close of business on March 22, 201627, 2019 ("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")Stock you owned on the Record Date.
| | | | |
| | | | 2019 Proxy Statement |
What constitutes a quorum? |
One third of the outstanding shares of Common Stock as of the Record Date. On the Record Date, there were 290,583,227278,156,930 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 advisory vote to approve named executive officerNamed 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.
| | | | |
| | | | |
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? |
Principal 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")(Demutualization) and the initial public offering of shares of the 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 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 22, 2016.27, 2019. 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.
| | | | |
| | | | 2019 Proxy Statement |
How do I contact the Board? |
Principal has a process for shareholders and all other interested parties to send communications to the Board through the Lead Director. You may contact the through the Lead Director of the Board through the Investor Relations section of the Company's website at www.principal.com, or by writing to:
Lead Director, c/o Karen E. Shaff
Executive Vice President, General Counsel and Secretary
Principal Financial Group, Inc.
Des Moines, Iowa 50392-0300
All emails and letters received will be categorized and processed by the Company's Secretary and then sent to the Company's Lead Director.
How do I submit a shareholder proposal or nominate a director for the |
The Company's next annual meeting is scheduled for May 16, 2017.18, 2020. Proposals should be sent to the Company's Secretary. Proposals toTo be considered for inclusionincluded in next year's proxy statement, proposals must be received by December 8, 2016.11, 2019. In addition, the Company's By-Laws provide that any shareholder wishing to propose any other business at the annual meeting must give Principal written notice between January 17, 201722, 2020 and February 21, 2017.2020. That notice must provide other information as described in the Company's By-Laws, which are on the Company's website, www.principal.com.
For proxy access nominees to be considered at the 2020 annual meeting, the nomination notice must be received by the Office of the Secretary no earlier than the close of business on November 11, 2019, and no later than the close of business on December 11, 2019. Among other things, the notice must include the information and documents described in Section 1.17 of the Company's By-Laws.
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 multipleother 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 isSEC, which are available on the Company's website at www.principal.com and at the Internet site maintained by the 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 CorporatePrincipal's Code of Business Conduct and Ethics are also available on the Company's website, www.principal.com.
The Board urges you to exercise your right to vote by using the Internet or telephone or by returning the proxy orvoting instruction card.
| | | | |
| | | | |
| | | ||
Towers Watson | ||||
AAA Life Insurance | | CNO Financial | ||
AAA Northern California, Nevada & Utah | | Cobank | ||
ACI Worldwide | | Coface | ||
AFLAC | | Comerica | ||
AgriBank, FCB | | Commerce Bancshares | ||
AgStar Financial Services | | Common Securitization Solutions | ||
AIG | | Corporate One Federal Credit Union | ||
Alliance Data Systems | | Coverys | ||
Allianz Global Corporate & Specialty | | CSAA Insurance Group | ||
| CTBC Bank | |||
Allianz Technology | | Cullen Frost Bankers | ||
| Delta Dental of California | |||
| Delta Dental Plan of Michigan | |||
| ||||
| Eastern Bank | |||
| Element Fleet Management | |||
| Emblem Health | |||
| Employers Mutual Casualty Company | |||
| Enova International | |||
Associated Banc-Corp | | Erie Insurance | ||
| EverBank | |||
| Experian Americas | |||
AXA Group | | Express Scripts | ||
AXA Partners | | Farm Credit Bank of Texas | ||
| Farm Credit Foundations | |||
Bar Plan Mutual Insurance Company | | Farmers Group | ||
| Federal Home Loan Bank of | |||
| Federal Reserve Bank of Atlanta | |||
Blue Cross & Blue Shield Association | | Federal Reserve Bank of | ||
Blue Cross Blue Shield of Florida | | Federal Reserve Bank of Cleveland | ||
Blue Cross Blue Shield of Louisiana | | Federal Reserve Bank of | ||
Blue Cross Blue Shield of North Carolina | | Federal Reserve Bank of San | ||
Blue Cross Blue Shield of South Carolina | | Francisco | ||
| Federal Reserve Bank of St. Louis | |||
| Federal Reserve Board | |||
| Fifth Third Bancorp | |||
| FINRA | |||
| First | |||
| First Citizens Bank | |||
BUPA | | First Credit Union | ||
Capital One Financial | | First Financial Bancorp | ||
| First National of Nebraska | |||
| ||||
| Freddie Mac | |||
| GATX | |||
| Genworth Financial | |||
| ||||
| Great American Insurance | |||
| Great Western Bank | |||
CME Group | | Great-West Financial | ||
| GreenStone | |||
CNL Financial Group | | Guardian Life | ||
Hartford Financial Services Group | | Portfolio Recovery Associates | ||
| ||||
| ||||
Horizon Blue Cross Blue Shield of | ||||
| ||||
|
| | | | |
| | | | 2019 Proxy StatementA-1 |
| ||
Hudson Valley Federal Credit Union | | Radian Group |
Huntington Bancshares | | |
Iberia Bank | | |
| ||
Jackson National Life | | |
| ||
John Hancock | | |
| ||
KeyCorp | | |
Knights of Columbus | | |
| Society Insurance | |
| ||
| StanCorp Financial Group | |
| State | |
Logix Federal Credit Union | | System of Ohio |
Magnitude Capital | | Sun Life Financial |
Manulife Financial | | SunTrust Banks |
MAPFRE U.S.A. | | SVB Financial |
Marsh & McLennan | | |
Massachusetts Mutual | | |
Mercedes-Benz Financial Services | | |
Synovus Financial Corporation | ||
| TD Ameritrade | |
| ||
| Thrivent Financial for Lutherans | |
Mountain America Credit Union | | Tokio Marine HCC |
Munich Re Group | | Total System Service (TSYS) |
Mutual of Omaha | | |
| ||
Nationwide | | |
Navient | | Travelers |
Navy Federal Credit Union | | |
NCCI Holdings | | |
NC State Employees' Credit Union | | United Federal Credit Union |
New York Life | | |
Northern Trust | | Unum |
Northwestern Mutual | | |
OneAmerica Financial Partners | | |
OneBeacon Insurance | | |
Pacific Life | ||
| Voya Financial Services | |
Patelco Credit Union | | Walker & Dunlop |
PayPal | | Webster Bank |
Penn Mutual Life | | |
PennyMac Mortgage Investment Trust | | Western Union |
Pentagon Federal Credit Union | | |
People's Bank | | |
Plymouth Rock Assurance | | |
Zurich North America | ||
|
| | | | |
A-2 | | | | |
| | |
Towers Watson | ||
AFLAC | | Northwestern Mutual |
AIG | | OneAmerica Financial Partners |
Allstate | | Pacific Life |
AXA Group | | |
Principal Financial Group | ||
| Protective Life | |
Cigna | | Prudential Financial |
| Securian Financial Group | |
Guardian Life | | Sun Life Financial |
Hartford Financial Services | | Symetra Financial |
John Hancock | | Thrivent Financial for Lutherans |
Lincoln Financial | | Transamerica |
Massachusetts Mutual | | Unum |
MetLife | | USAA |
Nationwide | | Voya Financial Services |
New York Life | |
| | |
McLagan | ||
AB | | |
Aberdeen | | |
Acadian Asset Management, LLC | | |
Adams Funds | | |
Advisory Research, Inc. (Piper Jaffray) | | |
AEW Capital Management | | |
AJO | | Clark Capital Management Group, Inc. |
Allianz Global Investors | | ClearBridge Investments |
American Century Investments | | Cohen & Steers, Inc. |
AMG Funds LLC | | Coho Partners Ltd. |
AMP Capital Investors Limited | | Columbia Threadneedle—Ameriprise Financial |
Amundi Pioneer Asset Management USA, Inc. | | Commonfund |
Annaly Capital Management | | Conning Holdings Limited |
Artisan Partners Limited Partnership | | Copper Rock Capital Partners, LLC |
Ashmore Group plc | | Delaware Investments/Macquarie Investment Mgmt |
Aviva Investors | | Diamond Hill Capital Management, Inc. |
AXA Investment Managers | | Dimensional Fund Advisors Inc. |
Barings LLC | | Duff & Phelps Investment Management Co. |
| DuPont Capital | |
Bessemer Trust Company | | DWS (formerly Deutsche Asset Management) |
BlackRock, Inc. | | Eaton Vance Management |
| Edward Jones | |
BNY Mellon Asset Management | | Epoch Investment Partners, Inc. |
| ||
| Federated Investors, Inc. | |
| Fidelity Investments | |
| ||
| First Eagle Investment Management, LLC | |
Brown Brothers Harriman & Co. | | |
Franklin Templeton Investments | | ProShare Advisors LLC |
Fred Alger Management, Inc. | | PSP Investments |
Fund Evaluation Group, LLC | | Putnam Investments |
GAM USA | | Pzena Investment Management, LLC |
| | | | |
| | | | 2019 Proxy StatementA-3 |
| Rafferty Asset Management LLC (Direxion) | |
Glenmede Trust Company | | Raymond James Financial |
Goldman Sachs Asset Management | | Regions Investment Management, Inc. |
Grantham, Mayo, Van Otterloo & Co. LLC | | Research Affiliates, LLC |
Harding Loevner LP | | Resolute Investment Mgrs (formerly American Beacon) |
Hardman Johnston Global Advisors LLC | | Rothschild Asset Management Inc. |
Harris Associates | | Russell Investments |
Heitman | | Sands Capital Management, LLC |
Hennessy Advisors, Inc. | | Santa Barbara Asset Management, LLC |
Impax Group Plc | | Schroder Investment Management |
Insight Investment LLC | | SEI Investments |
INTECH | | Seix Investment Advisors LLC |
Intermediate Capital Group | | Shenkman Capital Management |
Invesco Ltd. | | Silvant Capital Management LLC |
Investec Asset Management US Ltd. | | Sit Investment Associates, Inc. |
J O Hambro Capital Management Ltd. | | Symphony Asset Management LLC |
Jacobs Levy Equity Management, Inc. | | T. Rowe Price Associates, Inc. |
| ||
| Thompson, Siegel & Walmsley LLC | |
Jensen Investment Management, Inc. | | |
| ||
Kayne Anderson Rudnick Investment | ||
| UBS Asset Management | |
Lazard Asset Management LLC | | Van Eck Associates Corporation |
| ||
Loomis, Sayles & Company, L.P. | ||
| Vaughan Nelson Investment Management, L.P. | |
| Virtus Investment Partners, Inc. | |
| Vontobel Asset Management, Inc. | |
| Waddell & Reed, | |
| WCM Investment Management | |
Manning & Napier Advisors, Inc. | | Wellington Management Company, LLP |
| Western Asset Management Company | |
MFS Investment Management | | Westfield Capital Management Company, L.P. |
Morgan Stanley Investment Management | | Westwood Holdings Group, Inc. |
Morningstar, Inc. | | William Blair & Company, L.L.C. |
Neuberger Berman Group | | |
Newfleet Asset Management, LLC | | |
Nikko Asset Management Americas, | | |
| ||
Nomura Corporate Research & Asset Mgmt, Inc. | | |
Numeric Investors LLC | | |
Nuveen Investments | | |
NWQ Investment Management Company, LLC | | |
Oaktree Capital Management, LLC | | |
| ||
OppenheimerFunds | | |
Orbis Investment Management Limited | | |
O'Shaughnessy Asset Management, LLC | | |
Pacific Current Group/Blackcrane Capital, LLC | | |
Pacific Investment Management Company LLC | | |
PanAgora Asset Management, Inc. | | |
| ||
| ||
Principal Global Investors | |
| | | | |
| ||||
| | |
| ||
|
Non-GAAP Financial Measuresfinancial measure reconciliations
Operating earnings versus U.S. GAAP (GAAP) net income available to common stockholdersPrincipal Financial Group, Inc.
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.
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||
| | Years Ended Dec. 31, | | | For the year ended Dec.31 | | ||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||
(In millions, except as noted) | | 2015 | | 2014 | | 2013 | | 2012 | | 2011 | | |||||||||||||||||||||
| | | | | | | | | | | | |||||||||||||||||||||
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 | | ||||||||||||||||
(in millions, except as indicated) | | 2018 | | 2017 | | 2016 | | 2015 | | 2014 | | |||||||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||
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 | ) | |||||||||||||||||||||
Net income available to common stockholders | | $ | 1,546.5 | | $ | 2,310.4 | | $ | 1,316.5 | | $ | 1,209.3 | | $ | 1,111.1 | | ||||||||||||||||
Net realized capital (gains) losses, as adjusted(1) | | 51.0 | | (307.3 | ) | (37.4 | ) | 133.8 | | 100.5 | | |||||||||||||||||||||
Other after-tax adjustments | | 72.6 | | (106.3 | ) | (1.1 | ) | (74.2 | ) | (82.3 | ) | | — | | (524.5 | ) | 52.0 | | (72.6 | ) | 106.3 | | ||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||
Net income available to common stockholders | | $ | 1,209.3 | | $ | 1,111.1 | | $ | 879.7 | | $ | 773.6 | | $ | 605.3 | | ||||||||||||||||
Non-GAAP operating earnings | | $ | 1,597.5 | | $ | 1,478.6 | | $ | 1,331.1 | | $ | 1,270.5 | | $ | 1,317.9 | | ||||||||||||||||
| | | | | | | | | | | | | | | | | | | | | | | ||||||||||
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 | )% | |||||||||||||||||||||
| | | | | | | | | | | | |||||||||||||||||||||
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 | % | |||||||||||||||||||||
| | | | | | | | | | | | |||||||||||||||||||||
Net income ROE available to common stockholders (including AOCI) | | 12.8 | % | 11.8 | % | 9.6 | % | 8.8 | % | 7.1 | % | |||||||||||||||||||||
| | | | | | | | | | | |
Net realized capital gains (loses) | | | | | | | ||||||||||
GAAP net realized capital gains (losses) | | $ | (75.4 | ) | $ | 524.2 | | $ | 171.1 | | $ | (51.1 | ) | $ | 14.7 | |
Recognition of front-end fee revenues | | 0.4 | | (0.2 | ) | 0.2 | | (0.1 | ) | 0.7 | | |||||
Market value adjustments to fee revenues | | 0.1 | | (0.1 | ) | (2.5 | ) | (1.1 | ) | — | | |||||
Net realized capital gains (losses) related to equity method investments | | (5.4 | ) | 1.4 | | 0.1 | | — | | — | | |||||
Derivative and hedging-related adjustments | | (64.9 | ) | (59.4 | ) | (94.1 | ) | (111.7 | ) | (92.8 | ) | |||||
Sponsored investment fund adjustments | | 12.9 | | 6.3 | | 6.1 | | 1.3 | | — | | |||||
Amortization of deferred acquisition costs | | (25.6 | ) | 47.4 | | (66.2 | ) | (12.2 | ) | (37.7 | ) | |||||
Capital gains distributed—operating expenses | | 15.7 | | (38.9 | ) | 3.7 | | 15.4 | | (10.6 | ) | |||||
Amortization of other actuarial balances | | (1.4 | ) | 7.6 | | (11.2 | ) | (1.8 | ) | (11.6 | ) | |||||
Market value adjustments of embedded derivatives | | 18.5 | | 48.1 | | 50.0 | | (0.2 | ) | 4.8 | | |||||
Capital gains distributed—cost of interest credited | | (1.3 | ) | (16.1 | ) | (10.9 | ) | (9.2 | ) | (10.6 | ) | |||||
Net realized capital gains (losses) tax adjustments | | 71.4 | | (209.1 | ) | 6.6 | | 45.6 | | 43.6 | | |||||
Net realized capital gains (losses) attributable to noncontrolling interest, after-tax | | 4.0 | | (3.9 | ) | (15.5 | ) | (8.8 | ) | (1.0 | ) | |||||
Net realized capital gains (losses) associated with exited group medical insurance business, after-tax | | — | | — | | — | | 0.1 | | — | | |||||
| | | | | | | | | | | | |||||
Total net realized capital gains (losses) after-tax adjustments | | 24.4 | | (216.9 | ) | (133.7 | ) | (82.7 | ) | (115.2 | ) | |||||
Net realized capital gains (losses), as adjusted | | $ | (51.0 | ) | $ | 307.3 | | $ | 37.4 | | $ | (133.8 | ) | $ | (100.5 | ) |
| | | | | | | | | | | | |||||
Diluted earnings per common share | | | | | | | ||||||||||
Net income | | $ | 5.36 | | $ | 7.88 | | $ | 4.50 | | $ | 4.06 | | $ | 3.65 | |
Net realized capital (gains) losses, as adjusted | | 0.17 | | (1.05 | ) | (0.13 | ) | 0.44 | | 0.34 | | |||||
Other after-tax adjustments | | — | | (1.79 | ) | 0.18 | | (0.24 | ) | 0.36 | | |||||
Adjustment for redeemable noncontrolling interest | | — | | — | | — | | — | | 0.06 | | |||||
| | | | | | | | | | | | |||||
Non-GAAP operating earnings | | $ | 5.53 | | $ | 5.04 | | $ | 4.55 | | $ | 4.26 | | $ | 4.41 | |
| | | | | | | | | | | | |||||
Stockholders' equity | | | | | | | ||||||||||
Stockholders' equity | | $ | 11,456.0 | | $ | 12,921.9 | | $ | 10,293.8 | | $ | 9,377.4 | | $ | 10,232.0 | |
Noncontrolling interest | | (66.0 | ) | (72.6 | ) | (66.5 | ) | (65.8 | ) | (48.0 | ) | |||||
| | | | | | | | | | | | |||||
Stockholders' equity attributable to Principal Financial Group, Inc. | | 11,390.0 | | 12,849.3 | | 10,227.3 | | 9,311.6 | | 10,184.0 | | |||||
Net unrealized capital (gains) losses | | (207.3 | ) | (1,455.1 | ) | (827.0 | ) | (715.9 | ) | (1,148.3 | ) | |||||
Net unrecognized postretirement benefit obligation | | 512.9 | | 371.1 | | 408.4 | | 450.2 | | 411.1 | | |||||
Preferred stock, at par | | — | | — | | — | | — | | (0.1 | ) | |||||
Pain-in capital—preferred stock | | — | | — | | — | | — | | (541.9 | ) | |||||
| | | | | | | | | | | | |||||
Stockholders' equity, excluding AOCI other than foreign currency translation adjustment, available to common stockholders | | $ | 11,695.6 | | $ | 11,765.3 | | $ | 9,808.7 | | $ | 9,045.9 | | $ | 8,904.8 | |
| | | | | | | | | | | | |||||
Net income ROE available to common stockholders (including AOCI) | | | | | | | ||||||||||
Net income ROE available to common stockholders (including AOCI) | | 12.8 | % | 20.0 | % | 13.5 | % | 12.8 | % | 11.8 | % | |||||
Net unrealized capital (gains) losses | | 0.9 | % | 2.1 | % | 1.1 | % | 1.3 | % | 1.2 | % | |||||
Net unrecognized postretirement benefit obligation | | –0.5 | % | –0.7 | % | –0.6 | % | –0.6 | % | –0.3 | % | |||||
| | | | | | | | | | | | |||||
Net income ROE available to common stockholders (x-AOCI other than FCTA) | | 13.2 | % | 21.4 | % | 14.0 | % | 13.5 | % | 12.7 | % | |||||
Net realized capital (gains) losses | | 0.4 | % | –2.8 | % | –0.5 | % | 1.5 | % | 1.2 | % | |||||
Other after-tax adjustments | | 0.0 | % | –4.9 | % | 0.6 | % | –0.8 | % | 1.2 | % | |||||
| | | | | | | | | | | | |||||
Non-GAAP operating earnings ROE (x-AOCI other than FCTA) | | 13.6 | % | 13.7 | % | 14.1 | % | 14.2 | % | 15.1 | % | |||||
| | | | | | | | | | | |
| | | | |
| | | | 2019 Proxy StatementB-1 |
| | | | ||
| | For the year ended, 31-Dec-18 | | ||
---|---|---|---|---|---|
| | | | ||
Operating revenues | | | | ||
Total revenues | | | $ | 14,237.2 | |
Net realized capital (gains) losses, net of related revenue adjustments | | | 132.3 | | |
Adjustments related to equity method investments | | | 55.3 | | |
| | | | ||
Operating revenues | | | $ | 14,424.8 | |
| | | | ||
Net revenue | | | | ||
Net revenue | | | $ | 6,092.9 | |
Operating expenses | | | (4,126.8 | ) | |
Non-GAAP pre-tax operating earnings (losses) attributable to noncontrolling interest | | | (11.6 | ) | |
Pre-tax net realized capital gains (losses) | | | (126.4 | ) | |
Pre-tax other adjustments | | | — | | |
Certain adjustments related to equity method investments and noncontrolling interest | | | (43.7 | ) | |
| | | | ||
Income (loss) before income taxes | | | $ | 1,784.4 | |
| | | | ||
Principal Global Investors operating revenues less pass- through commissions | | | | ||
Principal Global Investors operating revenues | | | $ | 1,736.3 | |
Principal Global Investors commission expense | | | (165.2 | ) | |
| | | | ||
Principal Global Investors operating revenues less pass- through commissions * | | | $ | 1,571.1 | |
| | | |
| | | | |
B-2 2019 Proxy Statement | | | | |
EE-9039-14EE-9039-16
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*** Exercise Your Right to Vote *** Important Notice Regarding the Availability of Proxy Materials for the Principal Financial Group, Inc. AnnualShareholder Meeting to beBe Held on Tuesday, May 17, 2016 Under Securities and Exchange Commission rules, you21, 2019 PRINCIPAL FINANCIAL GROUP, INC. Date: May 21, 2019 Time: 9:00 AM CDT 711 High Street You are receiving this communication because you hold shares in the above named company. This is not a ballot. You cannot use this notice that the proxy materials for the annual meeting are available on the Internet. Follow the instructions below to view the materials and vote online or request a copy. The items to be voted on and location of the annual meeting are on the reverse side. Your vote is important! If you want to receive a paper copy or an e-mail of these materials, you must request one. There is no charge to you for this request. Please make your request as instructed on the reverse side on or before May 6, 2016 to facilitate timely delivery.shares. This communication presents only an overview of the more complete proxy materials that are available to you on the Internet. You may view the proxy materials online at www.proxyvote.com or easily request a paper copy (see reverse side). We encourage you to access and review all of the important information contained in the proxy materials before voting. The1234567 1234567 Envelope # # of # Sequence # 1 OF 2 12 15 0000404703_1 R1.0.1.18 Broadridge Internal Use Only Job # Sequence # See the reverse side of this notice to obtain proxy statementmaterials and annual report are available at: www.investorvote.com Easy Online Access —voting instructions. PRINCIPAL FINANCIAL GROUP, INC. 711 HIGH STREET DES MOINES, IA 50392 ATTN: CINDY KREUDER Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 John Sample 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 1234567 1234567 1234567 234567 Meeting Information Meeting Type: Annual Meeting For holders as of: March 27, 2019 Location: Principal Financial Group Des Moines, Iowa B A Convenient Way to View Proxy Materials and Vote Step 1: Go to www.investorvote.com. Step 2: Follow the instructions on the screen to log in. Step 3: Click on the icon on the right to view the current meeting materials. Step 4: Return to the investorvote.com window and make your selection as instructed on each screen to select delivery preferences and vote. When you go online, you can also help the environment by consenting to receive electronic delivery of future materials. 001CSP00B7 02B0UB P F GR C O D E
Before You Vote How to Access the Proxy Materials Proxy Materials Available to VIEW or RECEIVE: Have the information that is printed in the box marked by the arrow (located on the by the arrow (located on the following page) in the subject line. How To Vote Please Choose One of the Following Voting Methods marked by the arrow available and follow the instructions. Only 0000404703_2 R1.0.1.18 Vote In Person: Many shareholder meetings have attendance requirements including, but not limited to, the possession of an attendance ticket issued by the entity holding the meeting. Please check the meeting materials for any special requirements for meeting attendance. At the meeting, you will need to request a ballot to vote these shares. Vote By Internet: To vote now by Internet, go to www.proxyvote.com. Have the information that is printed in the box Vote By Mail: You can vote by mail by requesting a paper copy of the materials, which will include a proxy card. Internal Use 1. Notice & Proxy Statement2. Annual Meeting Notice Principal Financial Group, Inc.’s Annual MeetingReport How to View Online: following page) and visit: www.proxyvote.com. How to Request and Receive a PAPER or E-MAIL Copy: If you want to receive a paper or e-mail copy of these documents, you must request one. There is NO charge for requesting a copy. Please choose one of the following methods to make your request: 1) BY INTERNET:www.proxyvote.com 2) BY TELEPHONE:1-800-579-1639 3) BY E-MAIL*:sendmaterial@proxyvote.com * If requesting materials by e-mail, please send a blank e-mail with the information that is printed in the box marked Requests, instructions and other inquiries sent to this e-mail address will NOT be heldforwarded to your investment advisor. Please make the request as instructed above on or before May 17, 2016 at 750 Park Street, Des Moines, Iowa, at 9:00 a.m. Central Daylight Time. 07, 2019 to facilitate timely delivery.
The Board of Directors recommends ayou vote FOR proposals 1, 2 and 3:the following: 1. Election of Directors Nominees 1a. Michael T. Dan 1b. C. Daniel Gelatt 1c. Sandra L. Helton 1d. Blair C. Pickerell 2. Advisory vote to approve executive compensation 3. Ratification of appointment of independent auditors PLEASEregistered public accountants NOTE: YOU CANNOT VOTE BY RETURNING THIS NOTICE. To vote your shares you must go to www.investorvote.com,Such other business as may properly come before the meeting or you can request a setany adjournment thereof. xxxxxxxxxx Cusip Envelope # # of proxy materials by following the instructions at the bottom of this page. If you wish to attend the Annual Meeting, please bring proof of share ownership and photo identification with you. Directions to the Principal Financial Group, Inc. 2016 Annual Meeting 2016 Annual Meeting of Principal Financial Group, Inc. Shareholders Tuesday, May 17, 2016, 9:00 a.m. Central Daylight Time 750 Park Street, Des Moines, Iowa Upon arrival, please present proof of share ownership and photo identification at the registration desk. You do not need to attend the Annual Meeting to vote. Here’s how to order a copy of the proxy materials and select a future delivery preference: Paper copies: Current and future paper delivery requests can be submitted via the telephone, Internet or e-mail options below. E-mail copies: Current and future e-mail delivery requests must be submitted via the Internet following the instructions below. If you request an e-mail copy of current materials you will receive an e-mail with a link to the materials. P LEASE NOTE: You must use the number in the shaded bar on the reverse side when requesting a set of proxy materials. Telephone — Call us free of charge at 1-866-641-4276 in the USA, US territories & Canada using a touch-tone phone. Internet — Go to www.investorvote.com. E-mail — Send an e-mail to investorvote@computershare.com with “Proxy Materials PFG” in the subject line. Include in the message your full name and address, plus the number located in the shaded bar on the reverse, and state in the e-mail that you want a paper copy of current meeting materials. You can also state your preference to receive a paper copy for future meetings. To facilitate timely delivery, all requests for a paper copy of the proxy materials must be received by May 6, 2016. 02B0UB# Sequence # 0000404703_3 R1.0.1.18 Broadridge Internal Use Only xxxxxxxxxx Job # Sequence # B A R C O D E 23456789012 2 2 2 2 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 12345678901 Voting items
THE COMPANY NAME INC. - CLASS A THE COMPANY NAME INC. - CLASS C 123,456,789,012.12345 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS F 123,456,789,012.12345 Envelope # # of # Sequence # 0000404703_4 R1.0.1.18 Broadridge Internal Use Only THIS SPACE RESERVED FOR SIGNATURES IF APPLICABLE Job # Sequence # NAME THE COMPANY NAME INC. - COMMON 123,456,789,012.12345 THE COMPANY NAME INC. - CLASS B123,456,789,012.12345 THE COMPANY NAME INC. - CLASS D123,456,789,012.12345 THE COMPANY NAME INC. - CLASS E123,456,789,012.12345 THE COMPANY NAME INC. - 401 K123,456,789,012.12345 Reserved for Broadridge Internal Control 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 ofIf you would like to reduce the costs incurred by our company in mailing proxy and annual reports electronically via e-mail or the Internet. To sign up for Use any touch-tone telephone to transmit your voting instructions. Vote by 11:59 P.M. ET then follow the instructions. 1234567 Mark, sign and date your proxy card you may choose one ofand return it in the voting methods outlined below to vote your proxy. VALIDATION DETAILS ARE LOCATEDpostage-paid envelope we have 123,456,789,012.12345 TO VOTE, MARK BLOCKS BELOW IN THE TITLE BAR. Proxies submitted by the Internet or telephone must be received by 1:00 a.m., Central Daylight Time, on May 17, 2016. MR A SAMPLE DESIGNATION (IF ANY) ADD 1 ADD 2 ADD 3 ADD 4 ADD 5 ADD 6 Vote by Internet • Log on to the Internet and go to www.investorvote.com • Follow the steps outlined on the secured website. Vote by telephone • Call toll free 1-800-652-VOTE (8683) within the USA, US territories & Canada on a touch tone telephone • Follow the instructions provided by the recorded message Using a black ink pen, mark your votes with an X as shown in this example. Please do not write outside the designated areas. Annual Meeting Proxy Card 1234 5678 9012 345 q IF YOU HAVE NOT VOTED VIA THE INTERNETBLUE OR TELEPHONE, FOLD ALONG THE PERFORATION,BLACK INK AS FOLLOWS: KEEP THIS PORTION FOR YOUR RECORDS DETACH AND RETURN THE BOTTOMTHIS PORTION IN THE ENCLOSED ENVELOPE. q Election of Directors Proposals 1.ONLY THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED. The Board of Directors recommends ayou vote FOR the listed nominees. The Boardfollowing: 1. Election of Directors recommends a vote FOR Proposals 2 and 3. ForAgainstNominees For 0 0 0 0 For 0 0 Against 0 0 0 0 Against 0 0 Abstain + For Against0 0 0 0 Abstain 0 0 1a. Michael T. Dan 1b. C. Daniel Gelatt 1c. Sandra L. Helton 1d. Blair C. Pickerell 2. Advisory vote to approve executive compensation 3. Ratification of appointment 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 Belowregistered public accountants NOTE: Such other business as may properly come before the meeting or any adjournment thereof. Please sign exactly as your name(s) appearsappear(s) hereon. When signing as attorney, executor, administrator, corporate officer, trustee, guardian, or custodian,other fiduciary, please give full title.title as such. Joint owners should each sign personally. All holders must sign. If a corporation or partnership, please sign in full corporate or partnership name by authorized officer. Signature [PLEASE SIGN WITHIN BOX] Date (mm/dd/yyyy) — Please print date below. Signature (Joint Owners) Date 02 0000000000 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 4OF 1 1 <STOCK#> 02B0SB MMMMMMMMM2 0000404704_1 R1.0.1.18 SHARES CUSIP # JOB #SEQUENCE # VOTE BY INTERNET - www.proxyvote.com Use the Internet to transmit your voting instructions and for electronic delivery of information. Vote by 11:59 P.M. ET on 05/16/2019 for shares held in a Plan. Have your proxy card in hand when you access the web site and follow the instructions to obtain your records and to create an electronic voting instruction form. ELECTRONIC DELIVERY OF FUTURE PROXY MATERIALS materials, you can consent to receiving all future proxy statements, proxy cards electronic delivery, please follow the instructions above to vote using the Internet and, when prompted, indicate that you agree to receive or access proxy materials electronically in future years. VOTE BY PHONE - 1-800-690-6903 on 05/16/2019 for shares held in a Plan. Have your proxy card in hand when you call and John Sample 234567 VOTE BY MAIL 1234567 provided or return it to Vote Processing, c/o Broadridge, 51 Mercedes Way, Edgewood, NY 11717. NAME THE COMPANY NAME INC. - COMMON THE COMPANY NAME INC. - CLASS A THE COMPANY NAME INC. - CLASS B THE COMPANY NAME INC. - CLASS C THE COMPANY NAME INC. - CLASS D C B A X IMPORTANT ANNUAL MEETING INFORMATIONTHE COMPANY NAME INC. - CLASS E THE COMPANY NAME INC. - CLASS F THE COMPA N Y NAME INC. - 401 K CONTROL # SHARES123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 123,456,789,012.12345 x PAGE1 OF 2 PRINCIPAL FINANCIAL GROUP, INC. 711 HIGH STREET DES MOINES, IA 50392 ATTN: CINDY KREUDER Investor Address Line 1 Investor Address Line 2 Investor Address Line 3 Investor Address Line 4 Investor Address Line 5 8 8 8 1 1234 ANYWHERE STREET ANY CITY, ON A1A 1A1 234567 234567 234567 234567
. 2016Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting 2016Meeting: The Notice and Proxy Statement and Annual Report are available at www.proxyvote.com PRINCIPAL FINANCIAL GROUP, INC. Annual Meeting of Principal Financial Group, Inc. Shareholders Tuesday, May 17, 2016,21, 2019 9:00 a.m. Central Daylight Time 750 Park Street, Des Moines, Iowa Upon arrival, please show proofAM This proxy is solicited by the Board of share ownership and photo identification at the registration desk. You do not need to attend the Annual Meeting to vote. q IF YOU HAVE NOT VOTED VIA THE INTERNET OR TELEPHONE, FOLD ALONG THE PERFORATION, DETACH AND RETURN THE BOTTOM PORTION IN THE ENCLOSED ENVELOPE. q Proxy — Principal Financial Group, Inc.Directors This proxy is solicited on behalf of the Board of Directors of Principal Financial Group, Inc. for the annual meeting of shareholders to be held at 9:00 a.m. Central Daylight Time, May 17, 2016,21, 2019, at 750 Park Street.711 High Street, Des Moines, Iowa. The shareholder signator(s) on this form hereby appointsappoint(s) Timothy M. Dunbar, Terrance J. Lillis and Karen E. Shaff and Deanna D. Strable 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 20162019 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 Continued 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 INFORMATIONsigned on reverse side 0000404704_2 R1.0.1.18
. 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.