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TABLE OF CONTENTS
EXECUTIVE COMPENSATION

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

SCHEDULE 14A

Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act of 1934 (Amendment No.           )

Filed by the Registrant ý

Filed by a Party other than the Registrant o

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.

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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):
        
 
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    (5)   Total fee paid:
        
 

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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:
        
 
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April 7, 2014

Dear Shareholder:

              You are cordially invited to attend the annual meeting of shareholders on Tuesday, May 20, 2014, at 9:00 a.m., Central Daylight Time, at 711 High Street, Des Moines, Iowa.

              The notice of annual meeting and proxy statement provide an outline of the business to be conducted at the meeting. I will also report on the progress of the Company during the past year and answer shareholder questions.

              We encourage you to read this proxy statement and vote your shares. You do not need to attend the annual meeting to vote. You may complete, date and sign a proxy or voting instruction card and return it in the envelope provided (if these materials were received by mail) or vote by using the telephone or the Internet. Thank you for acting promptly.

Distribution of annual meeting materials

              As we've done in the past, The Principal is taking advantage of the Securities and Exchange Commission's rule that allows companies to furnish proxy materials for the annual meeting via the Internet to registered shareholders. For each shareholder selecting to receive these materials electronically in the future, the Principal Financial Group and the Arbor Day Foundation will plant the same number of trees in a U.S. forest. In 2013, 1,381 trees were planted.

    Sincerely,

 

 


SIGNATURE
    LARRY D. ZIMPLEMAN
Chairman, President and Chief Executive Officer

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PRINCIPAL FINANCIAL GROUP, INC.

NOTICE OF ANNUAL MEETING OF SHAREHOLDERS

May 20, 2014



              The annual meeting of shareholders of Principal Financial Group, Inc. (the "Company") will be held at 711 High Street, Des Moines, Iowa, on Tuesday, May 20, 2014, at 9:00 a.m., Central Daylight Time. Matters to be voted on are:

              These items are fully described in the proxy statement, which is part of this notice. The Company has not received notice of other matters that may be properly presented at the annual meeting.

              Shareholders of record at the close of business on March 26, 2014, are entitled to vote at the meeting. It is important that your shares be represented and voted at the meeting. Whether or not you plan to attend the meeting, please vote in one of the following ways:

              Shareholders will need to register at the meeting and present photo identification to attend the meeting. If your shares are not registered in your name (for example, you hold the shares through an account with your stockbroker), you will need to bring proof of your ownership of those shares to the meeting in order to register. You should ask the broker, bank or other institution that holds your shares to provide you with either a copy of an account statement or a letter that shows your ownership of Principal Financial Group, Inc. common stock on March 26, 2014. Please bring that documentation to the meeting to register.

    By Order of the Board of Directors

 

 


SIGNATURE
    KAREN E. SHAFF
Executive Vice President, General Counsel and Secretary
April 7, 2014    
    Important Notice Regarding Availability of Proxy Materials for the Shareholder Meeting to be held on May 20, 2014. The 2013 Annual Report, 2014 Proxy Statement and other proxy materials are available at www.investorvote.com. Your vote is important! Please take a moment to vote by Internet, telephone or proxy card as explained in the How Do I Vote sections of this document.

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TABLE OF CONTENTS

Questions and Answers About the Annual Meeting   5
Proposal One — Election of Directors   9
Corporate Governance   15

Board Leadership Structure

  15

Role of the Board of Directors in Risk Oversight

  15

Majority Voting

  16

Director Independence

  16

Certain Relationships and Related Transactions

  17

Board Meetings

  18

Corporate Code of Business Conduct and Ethics

  18

Board Committees

  18

Audit Committee Report

  20

Director Qualifications, Process for Identifying and Evaluating Director Candidates and Diversity of the Board

  21
Directors Compensation   23

Fees Earned by Directors in 2013

  24

Deferral of Cash Compensation

  24

Restricted Stock Unit Grants

  24

Director Perquisite and Reimbursement of Expenses

  25

Directors' Stock Ownership Guidelines

  25
Proposal Two — Approval of the Principal Financial Group, Inc. 2014 Directors Stock Plan   26
Executive Compensation   30

Compensation Discussion and Analysis

  30

Summary Compensation Table

  46

Grants of Plan Based Awards for Fiscal Year End December 31, 2013

  48

Outstanding Equity Awards at Fiscal Year End December 31, 2013

  49

Option Exercises and Stock Vesting

  50

Pension Plan Information

  51

Pension Benefits

  53

Non Qualified Deferred Compensation

  53
Payments Upon Termination   56

Employment Agreement

  56

Severance Plans

  56

Change of Control Employment Agreements

  56

Potential Payments Upon a Termination Related to a Change of Control

  59
Proposal Three — Approval of the Principal Financial Group, Inc. 2014 Stock Incentive Plan   60
Proposal Four — Advisory Vote to Approve Named Executive Officer Compensation   68
Proposal Five — Ratification of Appointment of Independent Registered Public Accountants   70

Audit Fees

  70

Audit Related Fees

  70

Tax Fees

  70

All Other Fees

  70
Security Ownership of Certain Beneficial Owners and Management   72

Section 16(a) Beneficial Ownership Reporting Compliance

  73
Appendix A Principal Financial Group, Inc. 2014 Directors Stock Plan   74
Appendix B Principal Financial Group, Inc. 2014 Stock Incentive Plan   81
Appendix C Executive Compensation Benchmarking Study Participants   98

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PROXY STATEMENT

PRINCIPAL FINANCIAL GROUP, INC.
711 HIGH STREET
DES MOINES, IOWA 50392-0100


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") rules allow companies to deliver a notice of Internet availability of proxy materials to shareholders and provide Internet access to those proxy materials. Shareholders may obtain paper copies of the proxy materials free of charge by following the instructions provided in the notice of Internet availability of proxy materials.

Why did I receive notice of and access to this proxy statement?

              The Board of Directors ("Board") of Principal Financial Group, Inc. ("Company") is soliciting proxies to be voted at the annual meeting of shareholders to be held on May 20, 2014, at 9:00 a.m., Central Daylight Time, at 711 High Street, Des Moines, Iowa, and at any adjournment or postponement of the meeting ("Annual Meeting"). When the Board asks for your proxy, it must send or provide you access to proxy materials that contain information required by law. These materials were first made available, sent or given to shareholders on April 7, 2014.

What is a proxy?

              It is your legal designation of another person to vote the stock you own. The other person is called a proxy. When you designate someone as your proxy in a written document, that document is also called a proxy or a proxy card. The Company has designated three of the Company's officers to act as proxies for the 2014 Annual Meeting; Terrance J. Lillis, Executive Vice President and Chief Financial Officer; and Karen E. Shaff, Executive Vice President, General Counsel and Secretary and Ralph C. Eucher, Executive Vice President.

What will the shareholders vote on at the Annual Meeting?

Will there be any other items of business on the agenda?

              The Company does not expect any other items of business because the deadline for shareholder proposals and nominations has passed. However, if any other matter should properly come before the meeting, the people authorized by proxy will vote according to their best judgment.

Who can vote at the Annual Meeting?

              Shareholders as of the close of business on March 26, 2014 ("Record Date") can vote at the Annual Meeting.

How many votes do I have?

              You will have one vote for every share of Company common stock ("Common Stock") you owned on the Record Date.

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What constitutes a quorum?

              One third of the outstanding shares of Common Stock as of the Record Date. On the Record Date, there were 294,953,410 shares of Common Stock outstanding. A quorum must be present, in person or by proxy, before any action can be taken at the Annual Meeting, except an action to adjourn the meeting.

How many votes are required for the approval of each item?

What are Broker Non votes?

              If your shares are held in a brokerage account, your broker will ask you how you want your shares to be voted. If you give your broker directions, your shares will be voted as you direct. If you do not give directions, the broker may vote your shares on routine items of business, but not on non routine items. Proxies that are returned by brokers because they did not receive directions on how to vote on non routine items are called "broker non votes."

How do I vote by proxy?

              Shareholders of record may vote by mail, by telephone or through the Internet. Shareholders may vote "for," "against" or "abstain" from voting for each of the Director nominees, the approval of the Directors Stock Plan and Stock Incentive Plan, the advisory vote to approve named executive officer compensation, and the proposal to ratify the appointment of the independent auditors.

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How do I vote shares that are held by my broker?

              If you own shares held by a broker, you may direct your broker or other nominee to vote your shares by following the instructions that your broker provides to you. Most brokers offer voting by mail, telephone and through the Internet.

How do I vote in person?

              If you are going to attend the Annual Meeting, you may vote your shares in person. However, we encourage you to vote in advance of the meeting by mail, telephone or through the Internet even if you plan to attend the meeting.

How do I vote my shares held in the Company's 401(k) plan?

              The trustees of the plan will vote your shares in accordance with the directions you provide by voting on the voting instruction card or the instructions in the email message that notified you of the availability of the proxy materials. Shares for which voting instructions are not received are voted in the discretion of the trustees.

How are shares held in the Demutualization separate account voted?

              The Company became a public company on October 26, 2001, when Principal Mutual Holding Company converted from a mutual insurance holding company to a stock company (the "Demutualization") and the initial public offering of shares of the Company's Common Stock was completed. The Company issued Common Stock to Principal Life Insurance Company ("Principal Life"), and Principal Life allocated this Common Stock to a separate account that was established to fund policy credits received as Demutualization compensation by certain employee benefit plans that owned group annuity contracts. Although Principal Life will vote these shares, the plans may give Principal Life voting directions. A plan may give voting directions by following the instructions on the voting instruction card or the instructions in the message that notified you of the availability of proxy materials. Principal Life will vote the shares as to which it received no direction in the same manner, proportionally, as the shares in the Demutualization separate account for which it has received directions.

Who counts the votes?

              Votes will be counted by Computershare Trust Company, N.A.

What happens if I do not vote on an issue when returning my proxy?

              If no specific instructions are given, proxies that are signed and returned will be voted as the Board of Directors recommends:

How do I revoke my proxy?

              If you hold your shares in street name, you must follow the instructions of your broker or bank to revoke your voting instructions. Otherwise, you can revoke your proxy or voting instructions by voting a new proxy or instruction card or by voting at the meeting.

What should I do if I want to attend the Annual Meeting?

              Please bring photo identification and, if your stock is held by a broker or bank, evidence of your ownership of Common Stock as of March 26, 2014. The notice of Internet availability of proxy materials you received in the mail, a letter from your broker or bank or a photocopy of a current account statement will be accepted as evidence of ownership.

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How do I contact the Board?

              The Company has a process for shareholders and all other interested parties to send communications to the Board through the Lead Director. You may contact the Lead Director of the Board through the Investor Relations section of the Company's website at www.principal.com, or by writing to:

              All emails and letters received will be categorized and processed by the Company's Secretary and then sent to the Company's Lead Director.

How do I submit a shareholder proposal for the 2015 Annual Meeting?

              The Company's next annual meeting is scheduled for May 19, 2015. Proposals should be sent to the Company's Secretary. Proposals to be considered for inclusion in next year's proxy statement must be received by December 8, 2014. In addition, the Company's By-Laws provide that any shareholder wishing to propose any other business at the annual meeting must give the Company written notice between January 20, 2015 and February 21, 2015. That notice must provide other information as described in the Company's By-Laws, which are on the Company's website, www.principal.com.

What is "householding?"

              We send shareholders of record at the same address one copy of the proxy materials unless we receive instructions from a shareholder requesting receipt of separate copies of these materials.

              If you share the same address as multiple shareholders and would like the Company to send only one copy of future proxy materials, please contact Computershare Trust Company, N.A. at 866-781-1368, or P.O. Box 43078, Providence, RI 02940-3078. You can also contact Computershare to receive individual copies of all documents.

Where can I receive more information about the Company?

              We file reports and other information with the SEC. This information is available on the Company's website 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 Corporate Code of Business Conduct and Ethics are also available on the Company's website, www.principal.com.

              The Board urges you to exercise your right to vote by using the Internet or telephone or by returning the proxy or voting instruction card.

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PROPOSAL ONE – ELECTION OF DIRECTORS


              The Board is divided into three classes with each class having a three year term. All of the nominees are currently Directors of the Company.


Nominees for Class I With Terms Expiring in 2017


     

PHOTO

 


Betsy J. Bernard
Age: 58
Director since: 1999 (Principal Life), 2001 (the Company)
Committees: Nominating and Governance (Chair), Human Resources, Executive
Public Directorships/Past 5 Years Zimmer Holdings, Inc. (current), BearingPoint, Telular Corporation, United Technologies Corporation, URS Corporation

Ms. Bernard has been Alternate Lead Director since May 21, 2007.

Ms. Bernard was President of AT&T from October 2002 until December 2003 where she led more than 50,000 employees with AT&T Business, then a nearly $27 billion organization serving four million business customers. She was Chief Executive Officer of AT&T Consumer 2001-2002, which served about 40 million consumers and contributed $11.5 billion to AT&T's normalized revenue in 2002. She was head of the consumer and small business division as Executive Vice 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.

SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of AT&T, Ms. Bernard has executive level experience in brand management, marketing to individuals and small businesses, sales, customer care, operations, product management, electronic commerce, executive compensation, strategic planning, technology and mergers and acquisitions.

She earned her bachelor's degree from St. Lawrence University, a master's degree in business administration from Fairleigh Dickinson University, and an MA from Stanford University in the Sloan Fellow Program.

 


PHOTO

 


Jocelyn Carter-Miller
Age: 56
Director since: 1999 (Principal Life), 2001 (the Company)
Committees: Finance (Chair), Nominating and Governance
Public Directorships/Past 5 Years Interpublic Group of Companies, Inc. (current), Netgear, Inc. (current)

Ms. Carter-Miller has been President of TechEd Ventures since 2005, which specialized in the development and marketing of high performance educational and personal empowerment programming. She was Executive Vice President and Chief Marketing Officer of Office Depot, Inc. from February 2002 until March 2004, with responsibility for the company's marketing for its 846 superstores, contract, catalog and e-commerce businesses in the United States and Canada and operations in 15 other countries. Before joining Office Depot, she was Corporate Vice President and Chief Marketing Officer of Motorola, Inc. with overall responsibility for marketing across its $30 billion revenue base and diverse businesses. She also had general management responsibility while at Motorola for network operations in Latin America, Europe, the Middle East and Africa. Prior to joining Motorola, she was Vice President, Marketing and Product Development at Mattel, Inc.

SKILLS AND QUALIFICATIONS: In addition to her marketing leadership background, Ms. Carter-Miller has executive level experience in brand management, advertising, sales, multinational companies, international operations, mergers and acquisitions, product development, project management, strategic planning, technology and leadership development and training. She is also a certified public accountant.

She earned her B.S. in Accounting at the University of Illinois and an MBA in Finance and Marketing at the University of Chicago.

 

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Gary E. Costley
Age: 70
Director since: 2002
Committees: Audit, Finance, Strategic Issues
Public Directorships/Past 5 Years Covance,  Inc. (current), Prestige Brand Holdings, Inc. (Lead Director) (current), Tiffany & Co. (current), Accelrys, Inc., Pharmacopeia Drug Discovery, Inc.

Dr. Costley was Chairman and Chief Executive Officer of International Multifoods Corporation, a manufacturer and marketer of branded consumer food and food service products, from November 1997 until June 2004. Following his retirement from International Multifoods, which had just under $1 billion in sales in 2003, he was a cofounder and managing director of C & G Capital Management which provided capital and management to health, medical and nutritional products and services companies until May 2009. He was Dean of the Babcock Graduate School of Management at Wake Forest University in Winston-Salem, North Carolina, from 1995-1997 and taught business ethics during his tenure as a professor of management. Dr. Costley also had 24 years with Kellogg Company from 1970-1994 where he most recently was President of Kellogg North America.

SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of International Multifoods and Kellogg North America, Dr. Costley has executive level experience in brand management, marketing, sales, distribution, international operations, public affairs, corporate development, strategic planning, technology, quality management, executive compensation and mergers and acquisitions, and has taught business ethics.

He attended Oregon State University where he earned his bachelor's and master's degrees and a Ph.D.

 


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Dennis H. Ferro
Age: 68
Director since: 2010
Committees: Audit, Finance, Strategic Issues
Public Directorships/Past 5 Years NYMAGIC,  Inc.

Mr. Ferro served as President and Chief Executive Officer of Evergreen Investment Management Company, an asset management firm, from 2003 to 2008. Evergreen had assets under management of $175 billion on December 31, 2008, served more than four million individual and institutional investors through management of a broad range of investment products including institutional portfolios, mutual funds, variable annuities and other investments, and was led by 300 investment professionals. Mr. Ferro was the Chief Investment Officer of Evergreen from 1999 to 2003. From 1994-1999, he was Executive Vice President of Zurich Investment Management Ltd. and Head of International Equity Investments, and from 1991-1994 was Senior Managing Director of CIGNA International Investments. Prior to 1991, he held positions with Bankers Trust Company in Japan, as President and Managing Director, and in Florida and New York. Mr. Ferro is a member of the Investment Committee of the American Bankers Association. During 2009 - 2012, Mr. Ferro served as a corporate Director and Chairman of the Investment Committee of the New York Marine and General Insurance Company, a subsidiary of NYMAGIC, Inc.

SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of Evergreen Investment Management Company, Mr. Ferro has executive level experience in asset management, investment portfolio management, financial services, international operations, product development, marketing and distribution, strategic planning, executive compensation, risk management and mergers and acquisitions.

He earned a bachelor's degree from Villanova University and an MBA in finance from St. John's University. Mr. Ferro is a Chartered Financial Analyst ("CFA").

 

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Continuing Class II Directors With Terms Expiring in 2015


     

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Richard L. Keyser
Age: 71
Director since: 2002
Committees: Human Resources, Nominating and Governance
Public Directorships/Past 5 Years Zebra Technologies Corporation (current), W.W. Grainger, Inc., Rohm and Haas Company

Mr. Keyser was Chairman Emeritus of W.W. Grainger,  Inc., an international distributor of products used by businesses to maintain, repair and operate their facilities, from April 2009 — April 2010. He had been Chairman of the Board of Grainger since September 1997 and served as Grainger's Chief Executive Officer from March 1995 — May 2008. Previously he was President and Chief Executive Officer from March 1995 — September 1997, as well as President and Chief Operating Officer from March 1994 — March 1995. Mr. Keyser was honored as the National Association of Corporate Directors 2010 Public Company Director of the Year.

SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of Grainger, which had sales of $6.4 billion in 2007, Mr. Keyser gained executive level experience at Grainger in international operations, notably China and Mexico, operational excellence, customer service, integrated distribution networks, marketing to individuals, businesses and institutions, electronic commerce, executive compensation, strategic planning, and mergers and acquisitions.

He earned his bachelor's degree in nuclear science at the U.S. Naval Academy and a master's degree in business administration at Harvard University.

 


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Luca Maestri
Age: 50
Director since: February 1, 2012
Committees: Audit, Finance
Public Directorships/Past 5 Years None

Mr. Maestri has been Corporate Controller of Apple Inc., which designs and markets mobile communication and media devices and personal computers, since March 2013.

He was Chief Financial Officer and an Executive Vice President of Xerox Corporation from February 2011 — February 2013 and Chief Financial Officer of Nokia Siemens Networks from 2008 — February 2011. Before joining Nokia, he held senior executive finance positions with General Motors Corporation. A 20 year employee of GM, he served as CFO of GM Europe and GM Brazil, and was executive in charge of the Fiat Alliance for GM Europe in Switzerland. Earlier in his career, Mr. Maestri was CFO of GM Thailand, director of operations analysis for GM Asia Pacific, and CFO of GM Ireland.

SKILLS AND QUALIFICATIONS: Mr. Maestri has financial management experience, currently serving as the Corporate Controller of Apple, which had $156.5 billion in revenues for fiscal year 2012. He was the Chief Financial Officer of Xerox until February 28, 2013, which had $22.4 billion in revenues in 2012. He was responsible for all finance, treasury, investor relations, risk management, mergers and acquisitions, tax, and audit operations at Xerox. In addition to also serving as a chief financial officer at Nokia Siemens Networks and in various other financial management roles at General Motors, Mr. Maestri has extensive international and general management experience.

Mr. Maestri received a bachelor's degree in economics from LUISS University in Rome in 1988, and a master's degree in science of management from Boston University in 1991.

 

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Elizabeth E. Tallett
Age: 64
Director since: 1992 (Principal Life), 2001 (the Company)
Committees: Human Resources, Nominating and Governance, Executive
Public Directorships/Past 5 Years Meredith Corporation (current), Qiagen, N. V., (current), WellPoint (current), Coventry Health Care, Inc., Immunicon, Inc., IntegraMed America, Inc., Varian, Inc. and Varian SemiConductor Equipment Associates, Inc.

Ms. Tallett has been Lead Director since 2007 and has also served as Alternate Lead Director.

Ms. Tallett has been a Principal of Hunter Partners, LLC, a management company for early to mid stage pharmaceutical, biotech and medical device companies, since July 2002. She has more than 30 years' experience in the biopharmaceutical and consumer industries.

SKILLS AND QUALIFICATIONS: Ms. Tallett's senior management experience includes President and Chief Executive Officer of Transcell Technologies, Inc., President of Centocor Pharmaceuticals, member of the Parke-Davis Executive Committee, and Director of Worldwide Strategic Planning for Warner-Lambert. In addition to her leadership and financial management in pharmaceutical and biotechnology firms, she has executive level experience in multinational companies, international operations, economics, strategic planning, marketing, product development, technology, executive compensation and mergers and acquisitions.

She received a bachelor's degree with honors in mathematics and economics from the University of Nottingham in England.

 

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Continuing Class III Directors With Terms Expiring in 2016


     

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Michael T. Dan
Age: 63
Director since: 2006
Committees: Human Resources (Chair)
Public Directorships/Past 5 Years The Brink's Company

Mr. Dan was Chairman, President and Chief Executive Officer of The Brink's Company, a global provider of secure transportation and cash management services, from 1999 - 2011. The Brink's Company had 70,000 employees worldwide, operations in over 100 countries and $3.8 billion in revenue in 2011. Prior to joining Brink's, Mr. Dan served as president of Armored Vehicle Builder,  Inc.

SKILLS AND QUALIFICATIONS: In addition to leading and being responsible for financial management of Brink's, Mr. Dan has executive level experience in international operations, risk management, strategic planning, brand management, executive compensation, customer service, marketing and mergers and acquisitions.

He studied business and accounting at Morton College in Cicero, Illinois, and completed the advanced management program at Harvard Business School.

 


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C. Daniel Gelatt
Age: 66
Director since: 1988 (Principal Life), 2001 (the Company)
Committees: Audit, Human Resources, Strategic Issues (Chair)
Public Directorships/Past 5 Years None

Dr. Gelatt has been President of NMT Corporation since 1987. NMT is an industry leader in mobile mapping and workforce automation software and has been providing graphic imaging services to clients worldwide for more than 40 years. He was an Assistant Professor from 1975-1979 in the Physics Department at Harvard University, where he earned his Ph.D., and was a research manager at the IBM T.J. Watson Research Center before joining the Gelatt companies in 1982.

SKILLS AND QUALIFICATIONS: In addition to leading and having financial responsibility for NMT and other Gelatt privately owned companies, he has an extensive background in software and nonlinear optimization and executive level experience in product development, marketing and strategic planning.

He earned his bachelor's and master's degrees at the University of Wisconsin and his MA and Ph.D. at Harvard University.

 

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Sandra L. Helton
Age: 64
Director since: 2001
Committees: Audit (Chair), Finance, Executive
Public Directorships/Past 5 Years Covance,  Inc. (current), Lexmark International, Inc. (current)

Ms. Helton was Executive Vice President and Chief Financial Officer — Telephone and Data Systems, Inc. ("TDS"), a diversified telecommunications organization that includes United States Cellular Corporation, from 1998 through 2006. As of December 31, 2006, TDS served 7 million customers/units in 36 states with annual revenues of $4.5 billion. In her role, Ms. Helton had responsibility for the Finance, Information Technology, Strategic Planning, Corporate Communications, and Corporate Secretary functions. Prior to joining TDS, Ms. Helton spent 26 years with Corning Incorporated, where she held engineering, strategy and finance positions, including Senior Vice President and Treasurer from 1991 — 1997. She also served as Vice President and Corporate Controller of Compaq Computer Corporation from 1997-1998.

SKILLS AND QUALIFICATIONS: Ms. Helton has global executive level experience in corporate strategy, finance, accounting and control, treasury, investments, information technology and other corporate administrative functions, as well as extensive corporate governance experience.

Ms. Helton graduated from the University of Kentucky in 1971 with a B.S. degree in mathematics, summa cum laude, and earned an S.M. degree from Massachusetts Institute of Technology's Sloan School in 1977 with double majors in Finance and Planning & Control.

 


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Larry D. Zimpleman
Age: 62
Director since: 2006
Committees: Executive (Chair)
Public Directorships/Past 5 Years None

Mr. Zimpleman has been Chairman, President and Chief Executive Officer of the Company and Principal Life since May 2009, and was President and Chief Executive Officer of the Company and Principal Life from May 2008 — May 2009. He was President and Chief Operating Officer of the Company and Principal Life from June 2006 to May 2008 and President, Retirement and Investor Services of the Company and Principal Life from December 2003 to June 2006. He joined Principal Life in 1971 as an actuarial intern.

SKILLS AND QUALIFICATIONS: In addition to leading the Company and Principal Life as Chief Executive Officer since 2008, Mr. Zimpleman is a member of the board of directors of the American Council of Life Insurers, is the Chairman of the Financial Services Roundtable, and chairs the board of trustees of Drake University. He is Chair of the Iowa Business Council and Chair of the Financial Services Roundtable and formerly chaired the Principal Funds Board of Directors.

He earned a bachelor's degree and master's degree in business administration from Drake University in Des Moines, Iowa.

 

              The Board of Directors recommends that shareholders vote "For" all of the nominees for election at the Annual Meeting.

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CORPORATE GOVERNANCE


              The Principal Financial Group® is a global investment management leader offering businesses, individuals and institutional clients a wide range of financial products and services, including retirement services, insurance solutions and asset management. The business of the Company is managed under the direction of the Board. The Board selects, and provides advice and counsel to, the Chief Executive Officer ("CEO") and generally oversees management. The Board reviews and discusses the strategic direction of the Company, oversees risk and monitors the Company's performance against goals the Board and management establish.


Board Leadership Structure


              The Board currently has a combined position of Chairman of the Board and CEO, held by Larry D. Zimpleman, and a Lead Director, Elizabeth E. Tallett. Betsy J. Bernard is the Alternate Lead Director. The Lead Director is selected by the other independent Directors and the position does not automatically rotate. The Nominating and Governance Committee reviews the assignments as Lead Director and Alternate Lead Director annually. The Board regularly reviews its leadership model and is flexible about whether the positions of CEO and Chairman should be separate or combined. The decision is based on the tenure and experience of the CEO and the broader economic and operating environment of the Company. The Company has followed a pattern of separating the roles of Chairman of the Board and CEO during periods of management transition, with the prior Chairman retaining that position for a period of time as the newly appointed CEO assumes new responsibilities as the Company's chief executive. In the Company's experience, a flexible approach is preferable to an approach that either requires or disallows a combined Chairman/CEO.

              The Lead Director and the Chairman jointly make the decisions on the Board's agenda for each regular quarterly meeting, and the Lead Director seeks input from the other independent Directors. The Lead Director and Chairman share the duties of presiding at each Board meeting. The Chairman presides when the Board is meeting as a full Board. The Lead Director:


Role of the Board in Risk Oversight


              The Board believes that risk oversight is a responsibility of the full Board. The Board weighs risk versus return in the context of the organization's key risks and risk philosophy when approving corporate strategy and major business decisions, setting executive compensation and monitoring the Company's progress. Like all financial services companies, we are exposed to financial, pricing, operational and other business risks. The Board uses its committees for some of its risk oversight responsibilities and the committees report to the Board on these issues:

              The Audit Committee:

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              The Finance Committee:

              The Human Resources Committee:

              In selecting candidates for the Board, the Nominating and Governance Committee takes into account the need for the Board to have the collective skills and experience necessary to monitor the risks facing the Company.

              Risk management has long been an essential component of the Company's culture and operations. The Company has formally had a Chief Risk Officer since 2005, who oversees and coordinates the ERM Program, serves on many key management committees and operates independently of the businesses. The Chief Risk Officer regularly attends open sessions of the Board, Audit and Finance Committee meetings and meets in Executive Session with the Audit Committee with other members of management.

              The Chief Risk Officer and other members of senior management make periodic reports to and have discussions with the Board and its committees on the ERM Program, including how strategy, operational initiatives and investment portfolios integrate with the Company's risk objectives. These reports and discussions provide the Board with a greater understanding of the material risks the organization faces, whether management is responding appropriately, how certain risks relate to other risks, and the level of risk in actions presented for Board approval.

              Capital adequacy and structure are an important focus of the ERM Program. For each regular Board meeting, management reports on sources and uses of capital, satisfaction of regulatory and rating agency capital requirements, excess capital position, capital management and liquidity.

              Embedding these regular inputs (Board composition, committee responsibilities, and management focus, reporting and accountability) into its oversight responsibilities reflects the full Board's commitment to the importance of risk management.


Majority Voting


              Directors are elected by the majority of votes cast in uncontested Director elections. If an incumbent Director is not elected, and no successor is elected, the Board of Directors will decide whether to accept the resignation tendered by that incumbent Director. The Board's decision and reasons for its decision will be publicly disclosed within 90 days of certification of the election results.


Director Independence


              The Board determines at least annually whether each Director is independent, using its independence standards in these determinations. These independence standards include the New York Stock Exchange requirements for independence and are on the Company's website, www.principal.com. The Board considers all commercial, banking, consulting, legal, accounting, charitable, family and other relationships (as a partner,

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shareholder or officer of an organization) a Director may have with the Company and its subsidiaries. The Board most recently made these determinations for each Director in February 2014, based on:

              The Board affirmatively determined that the following Directors have no material relationship with the Company and are independent: Ms. Bernard, Ms. Carter-Miller, Dr. Costley, Mr. Dan, Mr. Ferro, Dr. Gelatt, Ms. Helton, Mr. Keyser, Mr. Maestri and Ms. Tallett. The Board also determined that all current members of the Audit, Finance, Human Resources and Nominating and Governance Committees are independent.

              In applying the Board's independence standards, the Nominating and Governance Committee and the Board considered the following relationships and transactions to be categorically immaterial to the determination of a Director's independence due to the nature of the transaction and the amount involved (in each of the transactions described below, the annual payments made or received by the Company did not exceed the greater of $1 million or 2 percent of the other company's gross revenues):


Certain Relationships and Related Transactions


              Nippon Life Insurance Company ("Nippon Life"), which held approximately 6% of the Company's Common Stock at the end of 2013, is the parent company of Nippon Life Insurance Company of America ("NLICA"). Nippon Life, NLICA and Principal Life have had an ongoing business relationship for more than 20 years. Principal Life assisted Nippon Life in the start up activities of NLICA, which began business in 1991. Nippon Life and NLICA purchase retirement and financial services offered by Principal Life and its subsidiaries. NLICA paid Principal Life approximately $42,828 for third party administration services related to its group welfare benefit plans and approximately $1,750 for wellness services during 2013. Nippon Life and NLICA also paid Principal Global Investors, LLC ("PGI") and its subsidiaries approximately $968,530 for investment services in 2013, and paid Principal Life approximately $226,293 for service related to its retirement plans in 2013. 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 2013 of $51,625,000 during Nippon Life's $2 billion public issuance in October of 2012.

              During a portion of 2013, certain affiliates of the Bank of New York Mellon held in the aggregate more than 5% of the Company's Common Stock. During 2013, affiliates of the Company, primarily Principal Life and PGI, paid the Bank of New York Mellon and certain of its affiliates approximately $1,274,735 in fees for services furnished in the ordinary course, primarily for administrative and trustee services.

              On May 1, 2013, a subsidiary of the Company, Principal Global Investors, LLC ("PGI"), sold a 20 percent stake in Post Advisory Group, LLC ("Post") to Nippon Life and one of its affiliates for approximately $38 million. PGI acquired Post in 2003 and retains an 80 percent ownership in the business. Post is an investment manager of high yield fixed income securities. The transaction is expected to enhance Nippon Life's fixed income investment

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management offerings to its clients and bring new distribution opportunities for Post. Post's management will continue to direct its day-to-day operations, with continued autonomy of investment decisions.

              The Nominating and Governance Committee or Chair of the Committee must approve or ratify all transactions with Related Parties that are not preapproved under the Company's Related Party Transaction Policy. At each quarterly meeting, the Committee reviews a report of any nonmaterial transactions with Directors or the firms of which they are an executive officer or director, and any other Related Party transactions, including those involving executive officers and shareholders who own more than five percent of the Company's Common Stock. The Committee ratifies these transactions if it determines they are appropriate. Transactions involving employment of a relative of an executive officer or Director must be approved by the Human Resources Committee. The Company's Related Party Transaction Policy may be found at www.principal.com.


Board Meetings


              The Board held 10 meetings in 2013, five of which were two day, in person meetings. Each of the Directors then in office attended more than 75 percent in the aggregate of the meetings of the Board and the committees of which the Director was a member. All of the Directors attended the 2013 Annual Meeting. The Company sets the date and place of Annual Meetings to coincide with a regular Board meeting so that all Directors can attend.


Corporate Code of Business Conduct and Ethics


              Each Director and officer of the Company has certified compliance with the Corporate Code of Business Conduct and Ethics.


Board Committees


              Only independent Directors may serve on the Audit, Human Resources and Nominating and Governance Committees. Committee members and Committee chairs are recommended to the Board by the Nominating and Governance Committee. The Committees review their charters and evaluate their performance annually. Committee charters of the Audit, Finance, Human Resources and Nominating and Governance Committees are available on the Company's website, www.principal.com.

              The following table shows the current membership and responsibilities of each of the Board Committees.

                                 
 
  Committee
   
  Members
(*Committee Chair)
   
  Meetings
Held in
2013

   
  Responsibilities
   

 

 

Audit

 

 

 

Gary E. Costley
Dennis H. Ferro
C. Daniel Gelatt
Sandra L. Helton*
Luca Maestri

 

 

 

9

 

 

 

Appointing, terminating, compensating and overseeing the Company's independent auditor; 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 audit plans and results; reviewing and reporting to the Board on accounting policies and legal and regulatory compliance; and reviewing the Company's policies on risk assessment and management.

The Board has determined that all members of the Audit Committee are financially literate and are independent, as independence for audit committee members is defined in the New York Stock Exchange listing standards, and that Ms. Helton is a financial expert, as defined by the Sarbanes-Oxley Act.

 

 

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  Committee
   
  Members
(*Committee Chair)
   
  Meetings
Held in
2013

   
  Responsibilities
   
    Human Resources       Betsy J. Bernard
Michael T. Dan*
C. Daniel Gelatt (as of 1/1/2014)
Richard L. Keyser
Elizabeth E. Tallett
      6       Evaluating the performance of the CEO and determining his compensation in light of the goals and objectives approved by the Committee; reviewing and approving compensation for all other officers of the Company and Principal Life at the level of Senior Vice President and above ("Executives"); reviewing and approving any employment, severance or change of control agreements and perquisites for Executives; overseeing Executive development and succession planning; acting on management's recommendations for salary and employee compensation policies for all other employees; administering the Company's Annual Incentive Plan, Incentive Pay Plan ("PrinPay Plan"), Stock Incentive Plan, and any other compensation plans that provide compensation to Executives; acting on management's recommendations that require Director action for broad based employee pension and welfare benefit plans; and reviewing the Company's compensation programs to confirm that these programs encourage management to take appropriate risks, and to discourage inappropriate risk and behaviors that are inconsistent with the Company's business plan, policies and risk tolerance.    
    Nominating and Governance       Betsy J. Bernard*
Jocelyn Carter-Miller
Richard L. Keyser
Elizabeth E. Tallett
      6       Recommends to the Board candidates for Director, Board Committee assignments and service as Lead Director and Alternate Lead Director; reviews and reports to the Board on Director independence, performance of individual Directors, process for the annual self evaluations of the Board and its Committees, content of the Company's Corporate Code of Business Conduct and Ethics, Director compensation, and the Corporate Governance Guidelines; reviews environmental and corporate social responsibility matters of significance to the Company.    
    Finance       Jocelyn Carter-Miller*
Gary E. Costley
Dennis H. Ferro
Sandra L. Helton
Luca Maestri
      10       Assists the Board with the organization's financial, investment and capital management policies; reviews the organization's capital structure and capital plan, significant financial transactions, financial policies, credit ratings, matters of corporate finance including issuance of debt and equity, shareholder dividends, and proposed mergers, acquisitions and divestitures; reviews and provides guidance to the Human Resources Committee and the Board on financial goals for the upcoming year; oversees the organization's investment policies, strategies and programs, and reviews the policies and procedures governing the use of financial instruments including derivatives; and assists the Board in overseeing and reviewing information regarding the organization's enterprise financial risk management, including the significant policies, procedures and practices used to manage liquidity risk, credit risk, market risk, tax planning and insurance risk.    
    Strategic Issues       Gary E. Costley
Dennis H. Ferro
C. Daniel Gelatt*
      4       Primarily responsible for planning the Board of Directors annual strategic retreat.    
    Executive       Betsy J. Bernard
Sandra L. Helton
Elizabeth E. Tallett
Larry D. Zimpleman*
      None       Generally acts only on matters delegated to it by the Board, and any actions must be approved by its independent members. Has all of the authority of the Board between Board meetings, unless the Board has directed otherwise, except it has no authority for certain matters set forth by law and in the Company's By Laws.    

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Audit Committee Report


              The Audit Committee oversees the Company's financial reporting process. Management has the primary responsibility for the financial statements and the reporting process, including the systems of internal controls. The Committee reviewed with management the audited financial statements for the fiscal year ended December 31, 2013, and discussed the quality, not just the acceptability, of the accounting principles, the reasonableness of significant judgments and the clarity of disclosures in the financial statements.

              The Committee discussed with Ernst & Young LLP, the Company's independent auditor, the matters required to be discussed by Statement on Auditing Standards ("SAS") 114, The Auditor's Communication with those Charged with Governance, as adopted by the Public Company Accounting Oversight Board (United States) ("PCAOB") in Rule 3200T. SAS 114 requires the independent auditor to communicate (i) the auditor's responsibility under standards of the PCAOB; (ii) an overview of the planned scope and timing of the audit; and (iii) significant findings from the audit, including the qualitative aspects of the entity's significant accounting practices; 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, 2013, for filing with the SEC. The Committee has also approved, subject to shareholder ratification, the appointment of Ernst & Young LLP as the Company's independent auditors for the fiscal year ending December 31, 2014.

              The Committee does not have the responsibility to plan or conduct audits or to determine that the Company's financial statements are complete and accurate and in accordance with generally accepted accounting principles. That is the responsibility of the Company's independent auditor and management. In giving our recommendation to the Board, the Committee has relied on (i) management's representation that such financial statements have been prepared with integrity and objectivity and in conformity with generally accepted accounting principles, and (ii) the report of the Company's independent auditor with respect to such financial statements.

Sandra L. Helton, Chair
Gary E. Costley
Dennis H. Ferro
C. Daniel Gelatt
Luca Maestri

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Director Qualifications, Process for Identifying and Evaluating Director Candidates and Diversity of the Board


              The Nominating and Governance Committee regularly assesses the appropriate mix of skills and characteristics of Directors in light of the current makeup of the Board and the Company's needs. The Committee periodically uses an outside consultant to help evaluate the expertise, backgrounds and competencies of the Directors in view of the current strategic initiatives and risk factors of the Company. The results of these assessments provide direction in searches for Board candidates.

              Individual performance reviews are conducted for Directors who are eligible for re-nomination at the next annual meeting. These reviews assess Directors' contributions, present occupation and other commitments. The Committee has used outside firms to assist the Committee with these Director evaluations.

              In Director and candidate evaluations, the Committee assesses personal and professional ethics, integrity, values, expertise and ability to contribute to the Board. The Board values experience as a current or former CEO or other senior executive, in financial services, in international business and with financial management or accounting responsibilities. The following competencies are also sought: strategic orientation, results orientation and comprehensive decision making, risk management and technology. Directors' terms must end prior to the annual meeting following their 72nd birthday.

              All Board members have:

              Several Directors have led businesses or major business divisions as CEO or President (Ms. Bernard, Dr. Costley, Mr. Dan, Mr. Ferro, Dr. Gelatt, Mr. Keyser, Mr. Maestri and Ms. Tallett). The following chart shows areas central to the Company's strategy, initiatives and operations for which Directors have specific training and executive level experience that assists them in their responsibilities.

GRAPHIC

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              Diversity of the Board is a valued objective. The Nominating and Governance Committee reviews the Board's needs and diversity in terms of race, gender, national origin, backgrounds, experiences and areas of expertise. The Board recognizes that diversity is an important factor in Board effectiveness, which is apparent by the Board's selection of Directors. The Board does not have a formal diversity policy. The Company's culture and commitment to diversity has been recognized by organizations such as the National Association of Female Executives, the Human Rights Campaign Corporate Equality Index, 2020 Women on Boards campaign and LATINA Style magazine. The Board's effectiveness benefits from Directors who have the skills, backgrounds and qualifications needed by the Board and who also increase the Board's diversity.

              The Committee will consider shareholder recommendations for Director candidates sent to the Nominating and Governance Committee, c/o the Company's Secretary. Director candidates nominated by shareholders are evaluated in the same manner as Director candidates identified by the Committee and search firms it retains.

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DIRECTORS' COMPENSATION


              Directors serve on the Boards of the Company, Principal Life and Principal Financial Services, Inc. Directors who are also employees do not receive any compensation for their service as Directors. The Company provides competitive compensation to attract and retain high quality Directors. A substantial proportion of Director compensation is provided in the form of equity to help align Directors' interests with the interests of shareholders.

              The Director compensation program is reviewed annually. The Nominating and Governance Committee uses the Board's independent compensation consultant, Frederic W. Cook & Co., Inc. ("Cook") to conduct a comprehensive review and assessment of Director compensation. Cook reviewed Director compensation in November of 2013. As a result of that review and the Committee's discussion, the Committee recommended to the Board that no changes be made to the program. The Board last changed the Director compensation program in November of 2011. The Company targets Director compensation at approximately the median of the peer group used for Executive compensation purposes ("Peer Group") (see page 37), which aligns with its Executive compensation philosophy.

              The following chart shows the Director fees effective since January 1, 2012:

                 
    Annual Cash Retainers (1)            
    -      Board       $90,000    
    -      Audit Committee Chair       $20,000    
    -      Human Resources Committee Chair       $17,500    
    -      Finance Committee Chair       $15,000    
    -      Nominating & Governance Committee Chair       $15,000    
    -      Other Committee Chairs       $5,000    
    -      Lead Director       $25,000    
                 
    Annual Restricted Stock Unit Retainer (2)            
    -      Board       $115,000    
                 
    Meeting Attendance Fees            
    -      Regularly Scheduled Board Meeting       No Meeting fees    
    -      Non-regularly Scheduled Board Meetings (in person)       $2,500 per day    
    -      Non-regularly Scheduled Board Meetings (Telephonic)       $1,000    
    -      Committee Meeting       $1,500    
    -      Telephonic Committee Meeting       $1,000    

(1)
Annual cash retainers are paid in two semiannual payments, in May and November, on a forward looking basis.
(2)
Annual restricted stock unit ("RSU") retainers are granted at the time of the annual meeting.

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Fees Earned by Directors in 2013


                                 
 
  Director Name
   
  Fees Earned or
Paid in Cash

   
  Stock Awards
(1)

   
  Total
   
    Betsy J. Bernard       $121,000       $114,992       $235,992    
    Jocelyn Carter-Miller       $128,000       $114,992       $242,992    
    Gary E. Costley       $120,000       $114,992       $234,992    
    Michael T. Dan       $119,500       $114,992       $234,492    
    Dennis H. Ferro       $118,500       $114,992       $233,492    
    C. Daniel Gelatt       $115,000       $114,992       $229,992    
    Sandra L. Helton       $137,000       $114,992       $251,992    
    Richard L. Keyser       $109,000       $114,992       $223,992    
    Luca Maestri       $115,000       $114,992       $229,992    
    Elizabeth E. Tallett       $134,000       $114,992       $248,992    

(1)
The amounts shown in this column reflect the grant date fair value of awards made in 2013, determined in accordance with FASB Accounting Standards Codification ("ASC") Topic 718. These awards do not reflect actual amounts realized or that may be realized by the recipients.


Deferral of Cash Compensation


              Directors may defer the receipt of their cash compensation under the Deferred Compensation Plan for Non-Employee Directors of Principal Financial Group, Inc. This Plan has four investment options:

              All of these funds are available to participants in Principal Life's Excess Plan. The returns realized on these funds during 2013 are listed in the table, "Qualified 401(k) Plan and Excess Plan," on pages 54-55.


Restricted Stock Unit Grants


              Directors receive an annual grant of restricted stock units ("RSUs"). The grant made in 2013 was made under the Principal Financial Group, Inc. 2005 Director Stock Plan. If approved by shareholders future grants (including those made at the 2014 annual meeting) will be made pursuant Principal Financial Group, Inc. 2014 Directors Stock Plan ("2014 Director Plan"). RSUs are granted at the time of the annual meeting, vest at the next annual meeting and are deferred until at least the date the Director leaves the Board. At payout, the RSUs are converted to shares of Common Stock. Dividend equivalents become additional RSUs, which vest and are converted to Common Stock at the same time and to the same extent as the underlying RSU. The Nominating and Governance Committee has the discretion to make a prorated grant of RSUs to Directors who join the Board other than at the annual meeting.

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              As of December 31, 2013, each Director had the following aggregate number of outstanding stock options and restricted stock units as a result of Director compensation in 2013 and prior years, including additional RSUs as the result of dividend equivalents:

                         
 
  Director Name
   
  Total Stock Options Outstanding
Fiscal year End 2013
(shares)(1)

   
  Total RSUs outstanding
Fiscal Year End 2013
(shares)

   
    Betsy J. Bernard       0       27,596    
    Jocelyn Carter-Miller       0       29,462    
    Gary E. Costley       0       27,596    
    Michael T. Dan       0       25,269    
    Dennis H. Ferro       0       13,431    
    C. Daniel Gelatt       0       32,104    
    Sandra L. Helton       0       27,596    
    Richard L. Keyser       1,885       31,643    
    Luca Maestri       0       9,108    
    Elizabeth E. Tallett       0       31,643    

(1)
Prior to May 2005, Directors received grants of stock options rather than RSUs.


Director Perquisites and Reimbursement of Expenses


              Directors are reimbursed for travel and other business expenses they incur while performing services for the Company.

              Principal Life matches charitable gifts up to an annual amount of $6,000 per nonemployee Director, and Directors' contributions to the United Way are also matched up to $10,000 per year. These matching contributions are available during a Director's term and the following three years. Principal Life receives the charitable contribution tax deductions for the matching gifts.

              Directors' spouses/partners may accompany them to the annual Board strategic retreat. The Company pays for some of the travel expenses and amenities for Directors and their spouses/partners, such as meals and social events. Directors are also covered under the Company's Business Travel Accident Insurance Policy and Directors' and Officers' insurance coverage. In 2013, the total amount of perquisites provided to nonemployee Directors was less than $10,000 in all cases.


Directors' Stock Ownership Guidelines


              To encourage Directors to accumulate a meaningful ownership level in the Company, the Board has had a "hold until retirement" stock ownership requirement since 2005. All RSU grants must be held through a Director's service on the Board, and may only be converted to Common Stock when the Director's Board service ends. The Board has a guideline that Directors own interests in Common Stock equal to five times the annual Board cash retainer within five years of joining the Board. Directors have been able to achieve this level of ownership through the RSU "hold until retirement" requirement. Once this guideline is met, Directors will not need to make additional share purchases if the guideline is no longer met due to a reduction in stock price, as long as the Director's ownership level is not reduced as a result of share sales.

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PROPOSAL TWO – APPROVAL OF THE PRINCIPAL FINANCIAL GROUP, INC.
2014 DIRECTORS STOCK PLAN


Introduction

              The Board believes that encouraging stock ownership by nonemployee directors through the use of stock based incentive compensation both aligns such directors' economic interests with those of shareholders, and assists the Board in attracting and retaining qualified directors.

              The number of shares authorized for issuance under the Principal Financial Group, Inc. 2005 Directors Stock Plan (the "2005 Director Plan") was intended to provide the basis for making grants for a period of several years following the Demutualization, with the expectation and understanding that the Company would seek the approval of shareholders to make additional awards for a longer period of time. Based on the success the Company has achieved in using stock based awards, the Board believes that it continues to be appropriate to have the ability to grant stock options, restricted stock and restricted stock units to nonemployee directors, as is authorized under the 2005 Director Plan (although the Board believes there should be some modification to the manner in which such awards are made). Accordingly, the Nominating and Governance Committee has recommended and the Board has adopted, subject to shareholder approval, the Principal Financial Group, Inc. 2014 Directors Stock Plan (the "2014 Director Plan").

              Upon approval of the 2014 Director Plan by shareholders, no new grants will be made under the 2005 Director Plan, although shares remaining available for grant under the 2005 Director Plan will become available for grant under the 2014 Director Plan. However, in the event that shareholders do not approve the 2014 Director Plan at the 2014 Annual Meeting, the Nominating and Governance Committee will continue to grant awards under the 2005 Director Plan.

              The Board of Directors recommends that shareholders vote "for" approval of the 2014 Director Plan.


Summary of the 2014 Director Plan

              The following summary of the 2014 Director Plan is qualified in its entirety by reference to the complete text of the 2014 Director Plan, which is attached to this proxy statement as Appendix A.

Shares Available for Issuance

              Subject to adjustment upon the occurrence of certain events described below, a maximum of 200,000 shares, plus any shares of Common Stock remaining available for grant under the 2005 Director Plan at the date the shareholders approve the 2014 Directors Plan, may be issued under the 2014 Director Plan in respect of annual and discretionary stock based awards. Authorized but unissued shares or treasury shares may be used to satisfy awards under the 2014 Director Plan.

              Shares subject to awards under the 2014 Director Plan or the 2005 Director Plan that have lapsed, are forfeited or cancelled or are settled without the issuance of stock, in each case after the effective date of the 2014 Director Plan, will be available for awards under the 2014 Director Plan. This includes shares that are withheld from an award to satisfy the participant's tax obligations. Additionally, shares owned by participants that are delivered to the Company to pay all or a portion of the exercise price of any award will also be available for awards under the 2014 Director Plan.

              If the Nominating and Governance Committee determines that any stock dividend, stock split, recapitalization, merger, consolidation, combination, spin off, distribution of assets to stockholders (other than ordinary cash dividends), exchange of shares, or other similar corporate event affects the shares, then the Nominating and Governance Committee shall make such equitable adjustments in the number and kind of shares which may thereafter be awarded or optioned under the 2014 Director Plan, the number and kind of shares subject to outstanding options and awards and the respective grant or exercise prices as it determines to be appropriate.

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Annual Grants and Discretionary Grants

              The 2014 Director Plan provides for a specific level of annual grants having a value of $115,000 to be made to each nonemployee director in the form of restricted stock units. The 2014 Director Plan also authorizes the Nominating and Governance Committee to make additional grants in its discretion which may be in the form of restricted stock, restricted stock units, stock options and other stock based awards. However, the 2014 Director Plan provides that in no event shall the value of any awards granted to any eligible director in any year by reason of the exercise of any discretionary authority afforded the Committee under the Plan (including the authority to increase the value of the standard annual grant) exceed $230,000 (or, in the case of any participant who is serving as the Chairman of the Board and who is not an employee of the Company, $500,000). This limit applies to grants that are made in addition to the stated annual grant value of $115,000 permitted under the 2014 Director Plan. Each of the 10 nonemployee directors expected to continue serving on the Board after the Annual Meeting will be eligible to receive awards under the 2014 Director Plan.

              Annual Grants.    Effective immediately following each annual meeting of shareholders occurring when the 2014 Director Plan is in effect (including the 2014 Annual Meeting), each nonemployee director then in office will receive an annual grant comprised of restricted stock units having a value of approximately $115,000 (or such greater or lesser amount as the Nominating and Governance Committee shall determine from time to time). Under the 2014 Director Plan, there will be no annual stock option grants to any nonemployee directors, consistent with the terms of the 2005 Director Plan.

              If a person becomes a nonemployee director after the effective date of the 2014 Director Plan and other than on the date of an annual meeting of shareholders, it is expected that such nonemployee director shall receive a pro rata award, based on the dollar value used to determine the grant of restricted stock units under the 2014 Director Plan immediately following the last shareholder meeting and such person's expected service through the next annual shareholder meeting. For purposes of the 2014 Director Plan, the Nominating and Governance Committee will determine the aggregate value of each award using valuation methodologies that are commonly used in U.S. compensation practices to value awards of a similar type and nature and the value of a share of Common Stock will be determined based on closing stock price of such stock on the New York Stock Exchange on the date of the grant.

              Annual awards of restricted stock units made under the 2014 Director Plan will become vested, subject to the nonemployee director's continued service on the Board, on the scheduled date of the next annual meeting of shareholders following such annual grant of restricted stock units. Unless the Nominating and Governance Committee otherwise determines prior to or at grant, a director's vested restricted stock units from annual awards shall be distributed in shares as soon as possible after the director's termination of Board service.

              Discretionary Grants.    The 2014 Director Plan also authorizes the Nominating and Governance Committee to make grants of restricted stock, restricted stock units, stock options and/or stock based awards to nonemployee directors, which would be in addition to the annual grants described in the preceding paragraphs. These discretionary grants may be made in the form of any type of award authorized for grant under the 2014 Director Plan and may relate to such number of shares of Common Stock as the Nominating and Governance Committee shall determine.

Administration

              The 2014 Director Plan will be administered by the Nominating and Governance Committee. The Nominating and Governance Committee shall have the sole and complete authority to adopt, alter and repeal such administrative rules, guidelines and practices governing the operation of the 2014 Director Plan as it shall deem advisable, and to interpret the terms and provisions of the 2014 Director Plan. However, no member of the Nominating and Governance Committee may participate in any decision that applies to his or her benefits or entitlements under the 2014 Director Plan, unless such decision applies generally to all nonemployee directors.

              Subject to the express terms of the 2014 Director Plan (including the limitations applicable with respect to the terms of annual grants), the Nominating and Governance Committee has broad discretion as to the specific terms and conditions of each award and any rules applicable thereto. Awards may not be assigned or transferred, except by will or the laws of descent and distribution, pursuant to a qualified domestic relations order, to the participant's immediate family and to other permitted transferees under rules established by the Nominating and Governance Committee.

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Restricted Stock or Units

              Under the 2014 Director Plan, the Nominating and Governance Committee may grant restricted stock and restricted stock units. Unless otherwise determined by the Nominating and Governance Committee, each annual grant (described above) made to non-employee directors will consist of restricted stock units. The Nominating and Governance Committee may determine the number of shares of restricted stock or the number of restricted stock units that would be granted as part of any discretionary award. The Nominating and Governance Committee has the power to determine the other terms and conditions of restricted stock and restricted stock unit awards, including, without limitation, determining the form (that is, shares of Common Stock, cash or a combination of cash and stock) and the timing of payment in respect of restricted stock units. Unless otherwise determined by the Nominating and Governance Committee at the time of grant, the annual grant of restricted stock units shall vest on the scheduled date of the first annual meeting of shareholders scheduled to occur after the date such restricted stock units are granted.

              If the Nominating and Governance Committee does not permit an earlier distribution date, subject to any deferral election made in accordance with such conditions as the Nominating and Governance Committee shall determine, payment shall be made in respect of all restricted stock units granted to a nonemployee director in connection with annual grants as soon as practicable after the cessation of the director's service on the Board. Discretionary grants of restricted stock units will be distributed in accordance with the terms determined by the Nominating and Governance Committee at the time of grant. Unless determined otherwise by the Nominating and Governance Committee, a nonemployee director shall forfeit any restricted stock or restricted stock units that are not vested as of the time of any such termination of service.

              Shares of restricted stock may not be sold, assigned, transferred, pledged or otherwise encumbered until the restrictions have lapsed. Subject to the forfeiture and transfer restrictions applicable to the award, a participant will have all of the rights of a shareholder in respect of any award of restricted stock, including the right to vote such shares. Generally, a nonemployee director will not currently receive dividends and other distributions paid with respect to restricted stock. Instead, all dividends and distributions will be invested in additional shares of Common Stock that will become vested and nonforfeitable and payable upon the same terms and conditions applicable to the shares of restricted stock in respect of which they were paid. In the event that dividends and distributions are paid on shares of Common Stock, dividend equivalents will be credited in respect of shares underlying restricted stock units awarded to nonemployee directors and such amounts will become vested, payable and forfeitable on the same terms as the restricted stock units in respect of which they were paid.

Stock Options

              The Nominating and Governance Committee may grant nonemployee directors discretionary awards of stock options. The options granted under the 2014 Director Plan may only be non statutory options (as opposed to the 2014 Stock Incentive Plan, where the options may also be incentive stock options). The exercise price of any stock option granted may not be less than 100% of the fair market value of the underlying shares at the time of grant, and the Nominating and Governance Committee is not permitted to subsequently reduce the exercise price or otherwise reprice granted options without shareholder approval, except for adjustments in connection with changes in capitalization described above in the section "Shares Available for Issuance."

              The Nominating and Governance Committee has discretion to set the other terms and conditions of any options, but under no circumstances may an option have a term exceeding ten years from the date of grant. An option holder may satisfy the exercise price in cash or, at the discretion of the Nominating and Governance Committee, by exchanging shares owned by the optionee, by a combination of cash and shares, or in accordance with any other procedure or arrangement approved by the Nominating and Governance Committee. However, no method of exercise is permitted that would require the Company to loan a participant funds or otherwise extend credit to the participant. The Nominating and Governance Committee may permit nonemployee directors to defer amounts payable to such directors, upon exercise of options upon the terms and conditions it may establish from time to time.

              In the event that a nonemployee director's service terminates, any option that has not become exercisable prior to such termination will be canceled. Any option that is exercisable at the time of such termination will remain exercisable until the earlier of five years from the date that such director's service terminated and the stated term of the option (which cannot extend beyond the tenth anniversary of the grant date of the option.

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Other Stock Based Awards

              The Nominating and Governance Committee may also grant to nonemployee directors other stock based awards including, but not limited to, grants of stock and offers to purchase common stock. Such awards shall be granted on such terms and conditions as the Nominating and Governance Committee shall determine.

Term of the 2014 Director Plan and Amendments

              No award may be granted under the 2014 Director Plan after the tenth anniversary of the date that the plan is approved by shareholders. The 2014 Director Plan may be amended or terminated at any time by the Board, except that no amendment may adversely affect existing awards. Likewise, none of the following amendments may be made without shareholder approval: (i) an increase in the number of shares available for issuance under the plan; (ii) a decrease in the minimum exercise price at which an option is granted or any other repricing of outstanding options, including cancelation of an option when the exercise price exceeds the fair market value of a share of common stock in exchange for cash or another award, except as otherwise provided; (iii) an extension of the maximum term for options granted under the plan or (iv) any other amendment for which shareholder approval is otherwise necessary to comply with any tax or regulatory requirement, including any approval requirement which is imposed by the rules of the New York Stock Exchange, that the Nominating and Governance Committee determines to be applicable.

Description of Federal Income Tax Consequences under the 2014 Directors Plan

              The federal income tax consequences of grants of restricted stock, restricted units or stock options made under the 2014 Director Plan are substantially similar to those for each of the corresponding grant types described under "Proposal Three, Approval of The Principal Financial Group 2014 Stock Incentive Plan — Description of Federal Income Tax Consequences under the 2014 Stock Incentive Plan," except that nonemployee directors may not receive options that qualify as incentive stock options.

New Plan Benefits Table

              The following table sets forth the awards that will be made in 2014 pursuant to the annual grant provisions of the 2014 Director Plan, if shareholders approve the 2014 Director Plan. While the ultimate awards will be denominated in terms of restricted stock units that represent a contractual right to receive an equivalent number of shares, the table below shows the authorized dollar equivalent values for each such award. That is because the program is designed to convey a grant date award value that is measured by a specified dollar equivalent. The actual number of shares and restricted stock units with respect to these awards will be determined by dividing the dollar equivalent value by closing price of a share of Common Stock immediately preceding the date of grant, (which is the practice expected to be applied with respect to awards under the 2014 Stock Incentive Plan), which would be the date of the Annual Meeting if the shareholders approve the 2014 Director Plan.

           

 

           
 
  Name
  Dollar Equivalent of 2014
Restricted Stock Unit
Awards

   

 

 

Betsy J. Bernard

  $115,000    

 

 

Jocelyn Carter-Miller

  $115,000    

 

 

Gary E. Costley

  $115,000    

 

 

Dennis H. Ferro

  $115,000    

 

 

Michael T. Dan

  $115,000    

 

 

C. Daniel Gelatt

  $115,000    

 

 

Sandra L. Helton

  $115,000    

 

 

Richard L. Keyser

  $115,000    

 

 

Luca Maestri

  $115,000    

 

 

Elizabeth E. Tallett

  $115,000    

              No awards will be made to Company Executives or employees under the 2014 Director Plan. Any awards to be made to such individuals will be made under the 2014 Stock Incentive Plan, which is described below under the heading, "Proposal Three — Approval of the Principal Financial Group, Inc. 2014 Stock Incentive Plan."

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EXECUTIVE COMPENSATION


Contents:       Page    
                 
    Compensation Discussion & Analysis (CD&A)       30    
   

Our Performance in 2013

      31    
   

2013 Compensation Highlights

      32    
   

Compensation Program Philosophy and Policies

      33    
   

Summary of Compensation Elements

      34    
   

How we make compensation Decisions

      35    
   

2013 Executive Compensation Decisions

      37    
   

Base Salary

      38    
   

Annual Incentive Pay

      39    
   

Long term Incentive Compensation

      41    
   

Timing of Stock Option Awards and Other Equity Incentives

      42    
   

Benefits

      43    
   

Change of Control & Separation Pay

      43    
   

Perquisites

      44    
   

Stock Ownership Guidelines

      44    
   

Claw Back Policy

      45    
   

Trading Policy

      45    
   

Succession Planning

      45    
   

Human Resources Committee Report

      45    
   

Risk Assessment

      46    
    Compensation Tables            
   

Summary Compensation Table

      46    
   

Grants of Plan Based Awards Table

      48    
   

Outstanding Equity Awards Table

      49    
   

Option Exercises and Stock Vesting Table

      50    
   

Pension Benefits

      53    
   

Potential Payments Upon Termination Related to Change of Control

      59    


Compensation Discussion and Analysis (CD&A)


              The CD&A describes Principal Financial Group, Inc.'s Executive compensation objectives, and philosophy. It also describes our 2013 compensation program and reviews the outcomes, including the Company's financial performance in 2013. Management prepared the CD&A on behalf of the Human Resources Committee ("Committee"). The Committee then reviewed it and recommended to the Board that it be included in this Proxy Statement. Our Named Executive Officers in 2013 were:

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Our performance in 2013


Corporate highlights

              2013 ended with very strong results, posting both record total company operating earnings for the year and record assets under management. These results were particularly strong in light of continued macroeconomic volatility, demonstrating the strength of our global investment management strategy and our ability to focus and execute.

Divisional highlights

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              In 2013, the Company's total shareholder return was 76%, which was higher than the average of our Peer Group used for compensation purposes (60%). In addition, our 3-year total shareholder return continues to be higher, with a 3-year total shareholder return of 59%, compared to an average total shareholder return of 53% for companies in our Peer Group.

CHART


2013 Compensation Highlights


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Compensation Program Philosophy and Policies


Compensation Philosophy – our compensation programs are designed to:

Compensation Policies – Principal's Executive compensation program incorporates the following best practices:

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Summary of Compensation Elements:


                         
 
  Compensation
Component

   
  Objective
   
  Description and 2013 Highlights
   
    Base Salary       Provides fixed income based on the size, scope and complexity of the Executive's role, Executive's historical performance and relative position compared to market pay information       Base salaries are generally targeted at market median, but may vary from median based on the Executive's performance, work experience, role and the difficulty of replacing the Executive.
 
In 2013, the Committee increased the Executives' base salaries, as detailed on page 38.
   
    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 several key financial measures, corporate and divisional goals, as outlined on pages 39-40.
 
Based on the Committee's assessment of performance, actual bonuses for 2013 were above target as detailed on page 41.
   
    Long Term Incentive Compensation       Motivates and rewards long term corporate performance as well as the Executive's contribution to achieving our long term objectives. Reinforces the link between the interests of the Executives and shareholders. Encourages retention.       Each year, the Committee establishes the long term award opportunity for each Named Executive Officer. One half of the award is granted in stock options and one half in performance based RSUs ("PSUs"). Having half of the award in PSUs and half in options creates a balance between achieving operating performance objectives and increases in shareholder value.
 
The PSUs vest based on both continued service and meeting financial objectives over a three year period (with each three year period treated as a "Performance Cycle").
 
The PSUs granted in 2013 for the 2013-2015 Performance Cycle will vest based on performance scales for average Return on Equity ("ROE") and average Book Value per Share ("BV/Share") over the performance period, as outlined on pages 41-42.
 
The PSUs granted in 2011 and 2012 for the 2011-2013 and 2012-2014 Performance Cycles followed the same design as described above for 2013-2015. For the 2011 – 2013 Performance Cycle, the awards vested and paid out at 99% based on our ROE performance of 12.8% and book value per share of $32.11.
   

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  Compensation
Component

   
  Objective
   
  Description and 2013 Highlights
   
    Benefits       Protect against catastrophic expenses and provide retirement savings opportunities.       Named Executive Officers participate in most of the same benefit plans as the Company's other U.S. based employees. These include: health, life, disability income, vision and dental insurance, an employee stock purchase plan, 401(k) plan and pension plan. Executives (except investment professionals) also participate in non qualified retirement plans (defined benefit and defined contribution).    
    Perquisites       Modest amount of additional benefits to help attract and retain Executive talent and enable Executives to focus on Company business with minimal disruption.       Executives are eligible for one physical examination per year.    
    Termination Benefits       Provide temporary income following an Executive's involuntary termination of employment, and, in the case of a change of control, to help ensure the continuity of management through the transition.       Refer to pages 56-59 for a discussion of our change of control and separation benefits. These benefits do not provide for excise tax gross ups.    


How We Make Compensation Decisions


              We use a formal decision making and review process that incorporates proper oversight, benchmarking against peers, independent advice, an annual decision making cycle and the use of board discretion when appropriate.

Human Resources Committee Involvement

              The Human Resources Committee oversees the development and administration of the Company's compensation and benefits policies and programs, approves of all aspects of the compensation program and compensation for Executives, and makes the compensation decisions for the CEO. In addition, the Human Resources Committee:

              The Committee engaged the consulting firm of Frederic W. Cook & Co., Inc. ("Cook") to advise it on the Company's Executive compensation program. Cook also advises the Nominating and Governance Committee on compensation for nonemployee Directors. Cook receives compensation from the Company only for its work in advising these Committees. Cook does not and would not be allowed to perform services for management. The Committee assessed the independence factors in applicable SEC rules and NYSE Listing Standards and other facts and circumstances and concluded that the services performed by Cook did not raise any conflict of interest.

              Each year the CEO, with input from the Human Resources Department and Cook recommends the amount of base salary increase (if any), annual incentive award and the long term incentive award for Executives (other than himself). These recommendations are based on the Executive's performance, the performance of the business areas for which the Executive is responsible (if applicable) and considerations such as retention. The Human Resources Committee reviews these recommendations and approves compensation decisions.

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              The CEO takes no part in determining his own compensation. The Human Resources Committee consults with the other independent Directors regarding the CEO's performance and then determines the compensation earned by the CEO for the current year and the CEO's compensation opportunity for the following year.

The role of the Independent Compensation Consultant & Interaction with Management

              The Committee has the sole authority to hire, approve the compensation of and terminate the engagement of the compensation consultant.

              Cook reviews the Company's Executive compensation program every other year. In the years in which Cook does not conduct a compensation study, the Committee makes compensation decisions, in part, on survey data provided by the Human Resources Department and input provided by Cook.

              A comprehensive study was undertaken by Cook in 2013 which influenced the Committee's decisions for the 2014 Executive compensation program. The study reviewed the design and structure of the Company's total Executive compensation program, including:

              The most recent review process included:

              The goals of the review are to assist the Committee in:

              Cook also:

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Use of Compensation Data

              The Committee reviews the Peer Group of companies it uses to compare Executive compensation every other year as part of Cook's study. Cook recommends an appropriate Peer Group of public, similarly sized, diversified financial services, insurance and asset management companies. Cook's recommendations take into account the Company's and the competitors' strategy, mix of business and size, as measured primarily by annual revenues, market capitalization and total assets. These companies are the major competitors in one or more of the Company's businesses, but none represent the exact business mix of the Company. Some of these companies have higher or lower market capitalization and revenue than the Company. The Company targets compensation for the Named Executive Officers at the median of the compensation of the named executive officers at the Peer Group companies. No changes to the Peer Group were made in 2013. The companies in the Peer Group used in Cook's 2013 analyses to assist in decisions on 2014 compensation were:

         

Affiliated Managers Group

 

Invesco

 

MetLife

Ameriprise Financial

 

Janus Capital Group

 

Prudential Financial

Eaton Vance

 

Legg Mason

 

StanCorp Financial

Franklin Resources

 

Lincoln National

 

Sun Life Financial

Hartford Financial Services

 

ManuLife

 

T. Rowe Price

              The Committee uses annual data from third party industry surveys for additional context for its compensation decisions.2. Further, every two to three years, the Company's non cash benefit programs are compared with those of more than 100 diversified financial services companies. This is a larger group than the Peer Group because the information is used in designing and evaluating our broad based employee benefit programs. Benefit programs are also compared against those of local employers in Des Moines, Iowa, due to the Company's significant employee population there.

              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 as a result of the analysis in 2013 because the program continues to meet the Company's objectives.


2013 Executive Compensation Decisions


              The Committee made compensation decisions for the Named Executive Officers based on the following factors:

   


2 The surveys used were the McLagan Investment Management survey, Towers Watson U.S. Financial Services Studies Executive Database, the Towers Watson Diversified Insurance Study of Executive Compensation. The names of the companies participating in these surveys are included in Appendix C.

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              The Committee also considers the tax and accounting consequences of each element of compensation, and tries to maximize the tax deductibility to the Company of compensation under Section 162(m) of the Internal Revenue Code ("Tax Code"). This Tax Code section limits the Company from deducting annual compensation exceeding $1,000,000 for our CEO and the three other most highly paid Named Executive Officers (other than our CFO) who are in office on the last day of the fiscal year ("Covered Employees"). There is an exception to this rule for performance based compensation. The Committee may provide compensation to Covered Employees that is not deductible if it determines, in its discretion, that it is appropriate to do so. For 2013, Messrs. Zimpleman, Houston, McCaughan and Valdés were Covered Employees.

              The chart below shows the 2013 target total compensation for our Named Executive Officers as well as the proportion of their compensation tied to the Common Share price. The majority of compensation paid to our Named Executive Officer's is variable and at risk as reflected in the chart below.

CHART


Base Salary


              When determining base salary for each Executive, the Committee considers the Peer Group median for comparable executive positions as well as the survey data referenced above, the Executive's performance, work experience, the importance of the position to the Company and how difficult it would be to replace the Executive. The table below provides the historical base salaries1 of the Named Executive Officers.

                                         
 
  Named Executive Officer
   
  2011
   
  2012
   
  2013
   
  Percent Increase
2012 to 2013

   
    Zimpleman       $900,000       $900,000       $925,000       2.8%    
    Lillis       $436,000       $475,000       $500,000       5.3%    
    Houston       $525,000       $550,000       $572,000       4.0%    
    McCaughan       $570,500       $600,000       $615,000       2.5%    
    Valdés             $525,000       $546,000       4.0%    

(1)
Salaries displayed in the table are as of December 31 of the year noted. This information differs from salary information in the Summary Compensation Table as the table includes salary earned and paid in the year noted. Changes in base salary are effective in March of each year.

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Annual Incentive Pay


              The Named Executive Officers may earn annual cash bonuses under the Principal Financial Group, Inc. Annual Incentive Plan. This plan was approved by shareholders in 2004, and complies with Section162(m) of the Tax Code so that these incentives to Named Executive Officers are considered performance based and are therefore fully tax deductible to the Company.

              The maximum aggregate bonus amount for the Named Executive Officers is 2% of annual operating income ("Bonus Pool"). For 2013, the maximum bonuses were:

                         
 
  Named Executive Officer
   
  Maximum Award as
Percentage of the
Annual Incentive Pool

   
  Maximum
Potential Award
Payment

   
    CEO (Zimpleman)       35%       $9.4 million    
    Second highest Paid Covered Employee (McCaughan)       30%       $8.1 million    
    Third highest Paid Covered Employee (Houston)       15%       $4.0 million    
    Fourth highest Paid Covered Employee (Valdés)       10%       $2.7 million    
    CFO (Lillis)       10%       $2.7 million    

              The Committee sets the target and maximum annual incentive awards for each Named Executive Officer. The Committee then uses its negative discretion to reduce the awards actually payable. After this reduction, maximum annual incentive opportunities are generally 200% of the target annual incentive opportunity. The Committee approved the following target awards for Named Executive Officers in each of the past three years:


Annual Incentive Targets (as a percentage of base salary)

                                 
 
  Named Executive Officer
   
  2011
   
  2012
   
  2013
   
    Zimpleman       150%       150%       175%    
    McCaughan       250%       300%       300%    
    Houston       125%       125%       125%    
    Valdés       n/a       75%       75%    
    Lillis       75%       100%       100%    

              Mr. Zimpleman's target award opportunity is greater than that of the other Named Executive Officers (except Mr. McCaughan's) because Mr. Zimpleman has overall responsibility for the Company and greater responsibilities than the other Named Executive Officers. 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. In establishing the target award opportunity for Messrs. Houston, Valdés and Lillis, the Committee considered the median incentive targets for comparable executive positions in the Peer Group companies, as well as the survey data referenced above.

Performance Goal Setting and Measurement Process

              The Board meets each September to review the Company's long term strategy. In November, the CEO, CFO and Division Presidents recommend preliminary financial goals for the Company and business units and strategic initiatives for the next year. The Finance Committee reviews the proposed goals, underlying assumptions of the goals and initiatives, key drivers of financial performance, trends and business opportunities and advises the Board and Human Resources Committee on the appropriateness of the financial goals. The Human Resources Committee reviews and approves the final goals for the Company, the CEO and the other Executives with input from the Finance Committee and Board based on year-end financial results. All employees develop individual performance goals with their leaders that support the Company's goals.

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              The Committee reviewed performance on several key financial measures and on corporate and divisional goals to determine the annual bonus for Named Executive Officers. The Committee does not use any particular weighting for these goals; these measures are used as guideposts when the Committee exercises its discretion in its subjective evaluation of these factors.

              In determining corporate performance for 2013, the Committee reviewed Company achievements on these key financial goals:

                                                     
  
  Goal
   
  2013 Assessment
   
   
    1.   Achieve appropriate operating earnings and earnings per share ("EPS").       One of management's responsibilities is to lead the Company in achieving its goals for operating earnings and earnings per diluted share. For 2013, the target for operating earnings was $1 billion and the target for earnings per diluted share was $3.34. Actual 2013 operating earnings were $1,059.9 million and EPS was $3.55. In addition, Messrs. Houston, McCaughan and Valdés had operating earnings goals specific to the business units they oversee:    
                                                     
                               
                        Named Executive Officer       Operating
Earnings Goal
      Operating
Earnings Result
           
                               
                        Houston                            
                        • Retirement & Investor Services       $595 million       $694 million            
                        • US Insurance Solutions       $205 million       $197 million            
                               
                        McCaughan – Principal Global Investors       $95 million       $103 million            
                               
                        Valdés- Principal International       $260 million       $215 million            
                               
                                                        
    2.   Capital – maintain a targeted National Association of Insurance Commissioners ("NAIC") risk based capital ratio above 350%.       At year-end, the NAIC risk based capital ratio was 435%.    
    3.   Minimize credit loss.       A metric was established to measure whether the Company's invested assets (Principal Life's General Account) was appropriately managed. Ranges were established for after-tax bond credit losses and losses on commercial mortgage loans.    
                                                     
                               
                        Measure       Goal       Actual Result            
                               
                        Bond credit losses       13-19 basis points       15 basis points            
                               
                        Commercial mortgage loan losses       5-9 basis points       6 basis points            
                               
                                                        
    4.   Achieve identified sales targets require appropriate growth.       The Company had 2013 sales growth as outlined below, by business area:    
                                                     
                               
                        Business Unit       Target       Result            
                               
                        Houston                            
                        • Retirement & Investor Services Sales       $29.4 billion       $30.94 billion            
                        • Life Sales       $234.0 million       $209.5 million            
                        • Specialty Benefits premium and fees       $1.5 billion       $1,492.7 billion            
                               
                        McCaughan                            
                        • Principal Global Investors % growth in non-affiliated management fees       15%       12.4%            
                               
                        Valdés                            
                        • Principal International net cash flow       $14.2 billion       $8.5 billion            
                               
                                                        

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Final Annual Incentive Pay Award Determination

              The following table shows the annual incentive award for each of the Named Executive Officers. The column "Reduction from Maximum Award" shows the amount the Committee reduced the maximum bonuses to the awards paid.

                           

 

                           
 
  Named Executive
Officer

  2013 Salary
  2013
Target

  Final
Award

  % of
Target

  Reduction from
Maximum Award

   

 

 

Zimpleman

  $925,000   175%   $2,137,000   132%   $7,263,000    

 

 

Lillis

  $500,000   100%   $630,000   126%   $2,070,000    

 

 

Houston

  $572,000   125%   $858,000   120%   $3,142,000    

 

 

McCaughan

  $615,000   300%   $2,325,000   126%   $5,775,000    

 

 

Valdés

  $546,000   75%   $467,000   114%   $2,233,000    

              Executives may defer annual awards into a nonqualified supplemental savings plan ("Excess Plan"), as illustrated in the footnote to the Non Equity Incentive Compensation column of the Summary Compensation Table, on pages 46-47.


Long term Incentive Compensation


              The long term incentive compensation program is designed to align the interests of Executives and shareholders. The compensation the Executives receive reflects the degree to which multi-year financial objectives are achieved and shareholder value is increased. The long term focus of the compensation programs supports the Company's businesses in which long term performance is critical, such as retirement products, life insurance and asset management. The long term incentive compensation program also encourages collaboration among Executives in pursuing corporate wide goals.

              The Committee establishes a target long term incentive award opportunity for each Named Executive Officer stated as a percentage of each Named Executive Officer's base salary based on Peer Group and survey data, and on the advice of its independent compensation consultant. The Committee uses the following factors to adjust the target award and determine the actual award to be awarded to each Named Executive Officer ("Award Granted"):

              The compensation ultimately received by Named Executive Officers may vary considerably from the grant date fair value of the Award Granted, due to the Company's performance and changes in share price that occur after the grant.

2013 Long Term Incentive Target & Grant (as % of base salary)

 

               
 
  Named Executive Officer
  Target %
  Award Granted
   

 

 

Zimpleman

  525%   525%    

 

 

Lillis

  275%   300%    

 

 

McCaughan

  350%   325%    

 

 

Houston

  350%   375%    

 

 

Valdés

  225%   235%    

              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 he has overall responsibility for the Company.

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              Executives' long term compensation is awarded in the form of non-qualified stock options and performance based restricted stock units ("PSUs"), which each represent 50% of the total long term incentive award. PSUs entitle the Executive to earn shares of Principal Financial Group Common Stock if certain levels of performance are achieved. The Committee uses stock options as part of the long term incentive program because options are an effective way to link an Executive's compensation to changes in shareholder value. The weighting is not based on a specific formula or algorithm, but rather is intended to create a balance between the achievement of specific operating objectives and changes in shareholder value based on the Committee's judgment, which may change from time to time.

              Stock options have a ten year term and an exercise price equal to the closing price on the date of grant. Stock options vest in three equal annual installments starting on the first anniversary of the grant date.

              PSUs vest based on continued service and achieving financial objectives over a three year period (with each three year period treated as a "Performance Cycle"). Executives may defer the receipt of PSUs.

              For the 2013 PSUs, the performance threshold is met if either of the following goals is met:

              If either the ROE or OI objectives is met or exceeded, the number of units earned is determined using two performance measures, each weighted at 50%, to determine the funding level.

              In combination, the two measures selected provide a healthy tension in creating incentives to maintain a sufficient level of equity over the long term while also making sure that capital is being used effectively.

2013-2015 PSU Performance Scale
                     
 
  Performance Level
  Threshold
Award

  Target
Award

  Maximum Award
(150% of Target)

   
    Payout (% of Target) (1)   50%   100%   150%    
    Average ROE   7.5%   15%   19.5%    
    Average BV/Share   $27.20   $32.00   $41.60    




If neither the ROE nor the OI
threshold performance
objective is met, 
no PSUs will
be earned or paid out.



(1)
Straight line interpolation is used to determine awards for performance between threshold and target and between target and maximum.


Timing of Stock Option Awards and Other Equity Incentives


              Annual grants of stock options and PSUs for the Company's Executives are determined by the Committee at its February meeting, which occurs following the release of the prior year's results and during an open window period. The Committee formalized its long standing practices by adopting a policy regarding granting stock options and other equity awards. Under this policy, the grant date for all stock options and other stock based awards shall never be the earlier than the date of approval, and shall be:

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Authority of the Chairman, President & CEO to Grant Equity Awards:

              Under the 2010 Stock Incentive Plan, the Committee has delegated authority to the Chairman, President & CEO to make certain equity awards to sales agents and non Executive employees for new hires, promotions, retention and recognizing superior performance. The Committee receives a report on these grants at the next regular Committee meeting. The total awards granted by the Chairman, President & CEO may not exceed 250,000 shares per year.


Benefits


              The Named Executive Officers participate in Principal Life's broad based employee benefits program, including:

              Principal Life also offers all Named Executive Officers (except Mr. McCaughan) defined benefit and defined contribution non qualified retirement plans (the "NQDB" and the "Excess Plan"). These benefits are offered to attract and retain talent and provide long term financial security to employees. The NQDB helps the Company attract midcareer Executives and retain Executives by providing competitive retirement benefits. The NQDB is coordinated with the qualified pension plan and is designed to restore benefits that otherwise would accrue to Executives in the absence of Tax Code limitations on the qualified pension plan. The narrative to the Pension Benefits Table on pages 51-55 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 NonQualified Deferred Compensation Table on pages 53-55 provides additional information about the Excess Plan.

              The value of the retirement and savings plans for Non Grandfathered Participants (see page 52) 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 traditional pension plan benefit for Grandfathered Choice Participants (see page 51) 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 the Company and its shareholders to:

   


3 Effective January 1, 2010, Mr. McCaughan no longer participates in the qualified pension plan, NQDB Plan or Excess Plan. This change was the result of a compensation and benefit review of asset management companies that showed that these are not common benefits for executives in the asset management industry. This change also applied to other investment professionals who work with Principal Global Investors.

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              For these reasons, the Company has entered into "Change of Control" employment agreements with each of the Executives. These agreements would help the Executives more fairly evaluate a potential acquisition of the Company, 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.

              All benefits provided to the Executives upon a Change of Control are paid after both a Change of Control and qualifying termination of employment have occurred (sometimes referred to as a "double trigger"), except that the then current value of the Executive's Excess Plan and NQDB will be paid upon a Change of Control to ensure that the value of those plans is not reduced if the Company is sold. In 2010, the Company revised its Change of Control Agreements for Executives that generally reduced severance amounts as multiples of cash compensation and eliminated excise tax gross ups. See pages 56-59 for details.

              The Company has a severance plan to provide benefits to employees whose employment is terminated by the Company due to a reorganization or reduction in the workforce. Additional payments may be permitted in some circumstances as a result of negotiations with Executives, particularly when the Company requests additional covenants from the Executives. The Company has an employment agreement with Mr. Zimpleman for his services as the Company's CEO. See page 56 for details.


Perquisites


              The only perquisite for Executives that is not offered to all employees is one physical examination per year. We provide this perquisite to protect the health of our Executives and the Company's investment in its leadership.


Stock Ownership Guidelines


              Executives are required to own stock in the Company to ensure their interests are aligned with the shareholders' interests and with the long term performance of the Company. Once the Executive achieves the required stock ownership level based on market value, the ownership requirement remains at the number of shares owned at that time, regardless of subsequent changes in stock price or salary. Upon promotion, the Executive is required to meet the next level of stock ownership.

              Until the ownership guideline is met, Executives are required to retain a portion of the "net profit shares" resulting from equity based long term incentive plan grants. Net profit shares are the shares remaining after payment of the option exercise price and taxes owed at time of exercise, vesting of restricted stock units or earn out of performance shares. The percentage of net profit shares that must be retained until the multiple of salary guidelines are met are shown below:

               

 

               
 
  Executive Level
  Retention
Ratio

  Multiple of
Base Salary

   

 

 

CEO (Zimpleman)

  75%   5 times    

 

 

Division Presidents & Executive Vice Presidents (Houston, Lillis, McCaughan & Valdés)

  50%   3 times    

 

 

Senior Vice Presidents

  50%   2 times    

              All Named Executive Officers comply with these guidelines.

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Claw Back Policy


              The Committee has also adopted a compensation recovery policy that applies to Executives. The Company can recover incentive compensation if the amount of the compensation was based on achievement of financial results that were subsequently restated if the Committee decides that the Executive engaged in fraud or intentional misconduct that caused the restatement of the Company's financial statements, and that the amount of the Executive's incentive compensation or equity award would have been lower had the financial results been properly reported.


Trading Policy


              The Company prohibits Directors and employees, including Executives, from:


Succession Planning


              The Human Resources Committee, the CEO and the head of Human Resources maintain an ongoing focus on executive development and succession planning to prepare the Company for future success. In addition to preparing for CEO succession, the succession planning process has included 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. 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.


Human Resources Committee Report


              The Human Resources Committee of the Company has reviewed and discussed the foregoing Compensation Discussion and Analysis required by Item 402(b) of Regulation S-K with management, and based on such review and discussion, the Committee recommended to the Board that the Compensation Discussion and Analysis be included in this Proxy Statement.

Michael T. Dan, Chair
Betsy J. Bernard
C. Daniel Gelatt
Richard L. Keyser
Elizabeth E. Tallett

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Risk Assessment


              The Human Resources Compensation Department and the chief risk officers in the business units conducted a review and analysis of the Company's employee incentive compensation plans to determine whether compensation policies or practices are reasonably likely to have a materially adverse effect on the Company, and reviewed their processes and conclusions with the Chief Risk Officer. The following factors, among others, were assessed:

              Some key factors that mitigate risks of the Company's incentive plans are the Company's stock ownership guidelines for Executives, the compensation recovery policy and the Human Resources Committee's ability to exercise its judgment in evaluating the quality of performance achievements when determining earned compensation. The Company prohibits employees from purchasing Company securities on margin (except for the exercise of stock options), engaging in short sales or trading in any put or call options; and purchasing, directly or through a designee, any financial instrument (including prepaid variable forward contracts, equity swaps, collars and exchange funds) designed to hedge or offset any decrease in the market value of Company securities.

              A summary of the assessment process and conclusions was reviewed with the Human Resources Committee. Based on this analysis, the Company has determined that the Company's employee incentive compensation plans are designed to encourage behaviors that create and maintain shareholder value, do not encourage excessive risk, and are not reasonably likely to have a material adverse effect on the Company.


Summary Compensation Table


              The following table sets forth the compensation paid to the Named Executive Officers for services provided to the Company and its subsidiaries during 2011, 2012 and 2013.

                                                 
 
  Name
   
  Year
  Salary
(1)

  Bonus
  Stock
Awards
(2)(3)

  Option
Awards
(2)

  Non Equity
Incentive
Compensation
(4)

  Change in
Pension Value
and
Non qualified
Deferred
Compensation
Earnings (5)

  All Other
Compensation
(6)

  Total
(7)

   
    Zimpleman       2013   $919,231   $0   $2,428,124   $2,428,121   $2,137,000   $1,041,951   $80,474   $9,034,901    
    Chairman,       2012   $900,000   $0   $2,249,990   $2,491,679   $1,282,500   $3,605,227   $80,329   $10,609,725    
    President & CEO       2011   $876,923   $0   $1,799,986   $1,993,320   $1,302,000   $3,160,566   $72,732   $9,205,527    
    Lillis       2013   $494,231   $0   $750,001   $749,982   $630,000   $811,848   $42,651   $3,478,713    
    Executive Vice       2012   $466,000   $0   $653,136   $723,308   $443,000   $1,412,152   $24,571   $3,722,167    
    President & CFO       2011   $427,692   $0   $435,993   $482,827   $276,000   $974,268   $22,927   $2,619,707    
    Houston       2013   $566,923   $0   $1,072,505   $1,072,513   $858,000   -$50,354   $79,460   $3,599,047    
    Pres. Retirement,       2012   $544,231   $0   $1,031,260   $1,142,017   $612,000   $846,704   $88,603   $4,264,815    
    Ins. & Financial Svs       2011   $519,231   $0   $853,108   $944,764   $526,000   $507,677   $74,386   $3,425,166    
    McCaughan       2013   $611,539   $0   $999,377   $999,379   $2,325,000   $80,742   $13,290   $5,029,327    
    Pres. Global       2012   $593,192   $0   $974,995   $1,079,730   $1,602,000   $76,897   $13,673   $4,340,487    
    Asset Management       2011   $565,423   $0   $855,746   $947,681   $1,272,000   $73,235   $6,329   $3,720,414    
    Valdés       2013   $541,154   $0   $641,538   $641,536   $467,000   $90,767   $63,008   $2,445,003    
    Pres. - Int'l Asset       2012   $519,231   $0   $525,008   $581,366   $370,000   $35,446   $67,530   $2,098,581    
    Mgmt & Accum                                            

(1)
Includes 2013 salary deferred into the qualified 401(k) plan and the Excess Plan, as shown below (information detailing deferrals for 2012 was included in last year's proxy statement):

                     
 
  Named Executive
Officer

  401(k) Employee
Contribution

  Excess Plan Employee
Contributions

  Total Employee
Contributions

   
    Zimpleman   $19,346   $74,615   $93,961    
    Lillis   $14,635   $24,173   $38,808    
    Houston   $13,962   $36,892   $50,854    
    McCaughan   $17,500   $0   $17,500    
    Valdés   $13,577   $35,215   $48,792    

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(2)
Amounts represent the aggregate grant date fair value amounts for awards and options granted in the year noted. The assumptions for the valuation of stock and option awards under the ASC Topic 718 for awards are included in the Summary Compensation Table as follows:

                             
 
  Grant Date
  Exercise
Price

  Volatility
  Expected
Term

  Dividend
Yield

  Risk Free
Interest Rate

   
    February 28, 2011   $34.26   67.88%   6 years   1.605%   2.48%    
    February 27, 2012   $27.46   70.03%   6 years   2.550%   1.10%    
    February 25, 2013   $30.70   53.30%   6.5 years   2.997%   1.13%    
 
The grant date fair value per share of each RSU or PSU granted on the same date as an option listed in the above table was equal to the exercise price reported for options granted on such date.

(3)
PSUs will be earned and paid in shares of Common Stock only if performance requirements are met or exceeded. The PSUs are eligible for dividend equivalents, and the dividend equivalents are subject to the same performance requirements as the corresponding PSUs and are only earned if the performance measures are met or exceeded. The maximum payout for the 2011, 2012, and 2013 PSUs is 150% of the target number of PSUs. If the PSUs granted in 2013 are earned at the maximum payout, the grant date value of such PSUs would be as shown in the following table, and the amounts reported in the Stock Awards column, above, would be increased by the amount shown in the column to the far right of the following table.

                 
 
  Named Executive
Officer

  Grant Date Value of 2013 PSUs at Maximum Payout
  Amount by Which Aggregate Grant Date Values Reported Would be Increased
   
    Zimpleman   $3,642,187   $1,214,062    
    Lillis   $1,125,002   $375,001    
    Houston   $1,608,757   $536,252    
    McCaughan   $1,499,066   $499,689    
    Valdés   $962,307   $320,769    
(4)
The amounts shown represent annual incentive compensation awards earned in 2013 and paid in 2014 and include the following amounts deferred into the qualified 401(k) Plan and Excess Plan:

             
 
  Named Executive Officer
  Employee Contributions
on Incentive Pay

   
    Zimpleman   $213,912    
    Lillis   $45,985    
    Houston   $77,840    
    McCaughan   $0    
    Valdés   $51,694    
(5)
Assumptions underlying the determination of the amount of increase in actuarial value for both the qualified and nonqualified pension plans are disclosed on page 53. Changes in these assumptions and compensation changes will impact this value annually. There are no above market earnings on deferred compensation. For Mr. Houston, the change in pension value decreased due to an increase in the discount rate used to calculate the present value of the benefit.

(6)
All Other Compensation for the Named Executive Officers consists of the following:

                     
 
  Named Executive Officer
  Perquisites and Other
Personal Benefits
(a)

  Principal Life Contributions to
Defined Contribution Plans
(b)

  Total
   
    Zimpleman   $14,423   $66,051   $80,474    
    Lillis   $14,534   $28,117   $42,651    
    Houston   $8,724   $70,736   $79,460    
    McCaughan   $165   $13,125   $13,290    
    Valdés   $12,122   $50,886   $63,008    

                     
 
  Named Executive Officer
  401(k) Matching
Contribution Made by
Principal Life

  Excess Plan Matching
Contribution Made by
Principal Life

  Total
   
    Zimpleman   $6,562   $59,489   $66,051    
    Lillis   $5,250   $22,867   $28,117    
    Houston   $9,962   $60,774   $70,736    
    McCaughan   $13,125   $0   $13,125    
    Valdés   $13,125   $37,761   $50,886    
(7)
Sum of the total dollar value of the other columns in this table.

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Grants of Plan Based Awards for Fiscal Year End December 31, 2013


                                                                                                 
                    Estimated Future Payouts
Under Non Equity
Incentive Plan Awards
      Estimated Future Payouts
Under Equity
Incentive Plan Awards
(2)
      All Other
Stock
Awards:
Number
of
Shares
      All Other
Option
Awards:
Number of
Securities
      Exercise
or Base
Price of
      Grant
Date Fair
Value of
Stock and
   
                                                   
   

Name
     
Grant
Date
     
Threshold
 
     
Target
 
     
Maximum
(1)
     
Threshold
 
     
Target
 
     
Maximum
 
      of Stock
or Units
(3)
      Underlying
Options
(4)
      Option
Awards
(5)
      Option
Awards
(6)
   
    Zimpleman               N/A       $1,618,750       $9,400,000                                                            
            02/25/2013                               19,773       79,092       118,638                               $2,428,124    
            02/25/2013                                                               203,190       $30.70       $2,428,121    
    Lillis               N/A       $500,000       $2,700,000                                                            
            02/25/2013                               6,108       24,430       36,645                               $750,001    
            02/25/2013                                                               62,760       $30.70       $749,982    
    Houston               N/A       $715,000       $4,000,000                                                            
            02/25/2013                               8,734       34,935       52,403                               $1,072,505    
            02/25/2013                                                               89,750       $30.70       $1,072,513    
    McCaughan               N/A       $1,845,000       $8,100,000                                                            
            02/25/2013                               8,138       32,553       48,830                               $999,377    
            02/25/2013                                                               83,630       $30.70       $999,379    
    Valdés               N/A       $409,500       $2,700,000                                                            
            02/25/2013                               5,224       20,897       31,346                               $641,538    
            02/25/2013                                                               53,685       $30.70       $641,536    

(1)
The maximum award shown is the maximum aggregate award payable under the Annual Incentive Pay Plan for the Named Executive Officers, based on the Bonus Pool. In determining the actual annual incentive award payable, the Human Resources Committee exercises negative discretion to reduce the amount payable from the maximum award determined under the Annual Incentive Pay Plan as described on pages 39-41.
(2)
These columns reflect PSUs granted on February 25, 2013. These PSUs will vest, if at all, according to the 2013 — 2015 PSU performance scale outlined on page 42. The maximum payout for the 2013 PSUs is 150% of the target number of PSUs.
(3)
There were no other stock awards granted in 2013.
(4)
The options vest in three equal annual installments beginning on the first anniversary of the grant date. The options are not eligible for dividend equivalents. The number of stock options awarded to each Named Executive Officer in a given year is calculated by dividing the grant date fair value of one option into the portion of the Adjusted Target Award Opportunity (50%) to be delivered in options, using the Black-Scholes model (but adjusting for the possibility that some options may be forfeited because Named Executive Officers may terminate their employment prior to the options vesting).
(5)
The per-share option exercise price is the closing price of the Common Stock on the date of grant.
(6)
Represents the grant date fair value of the award at target.

48


Table of Contents


Outstanding Equity Awards at Fiscal Year End December 31, 2013


                                                 
            Option Awards       Stock Awards    
    Name       Number of
Securities
Underlying
Unexercised
Options
Exercisable
(1)
  Number of
Securities
Underlying
Unexercised
Options
Unexercisable
  Option
Exercise
Price
  Option
Expiration
Date
      Number of
Shares or
Units of
Stock that
Have Not
Vested
(2)
  Market
Value of
Shares or
Units of
Stock
that Have
Not
Vested
  Equity Incentive
Plan Awards:
Number of
Unearned
Shares, Units or
Other Rights that
Have Not Vested
(3)
  Equity Incentive
Plan Awards:
Market or
Payout Value of
Unearned
Shares, Units or
Other Rights
that Have Not
Vested (4)
   
    Zimpleman (5)       82,885   0   $49.25   02/27/2016                        
            1,120   0   $54.45   06/01/2016                        
            74,935   0   $62.63   02/26/2017                        
            142,985   0   $60.10   02/26/2018                        
            368,615   0   $11.07   02/24/2019                        
            144,700   0   $22.21   02/23/2020                        
            70,610   35,305   $34.26   02/28/2021               56,952   $2,808,287    
            59,538   119,077   $27.46   02/27/2022               86,332   $4,257,023    
            0   203,190   $30.70   02/25/2023               81,022   $3,995,207    
    Lillis (6)       7,380   0   $60.10   02/26/2018                        
            13,505   0   $56.42   05/19/2018                        
            33,765   0   $22.21   02/23/2020                        
            17,103   8,552   $34.26   02/28/2021               13,795   $680,224    
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