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Worth all $40 million
perhaps CATRINE JOHANSSON
A 3,200-percent pay increase. Now that's a raise. George Klaus, 63, president and chief executive officer of Epicor Software in Irvine, went from getting paid $1.2 million in 2002 to $39.7 million in 2003, most of it in restricted stock. That made him the highest compensated Orange County executive in 2003, according to a Register study of local companies with publicly traded stock. Klaus earned his $39.7 million, industry watchers say. After the stock hovered around $1 to $3 for two years, Klaus led efforts that brought the shares' value up to end last year at $12.76. That more than 300 percent increase made the stock the year's top performer in Orange County and the 15th-highest percentage gainer on the Nasdaq stock exchange. Klaus partly accomplished this by cutting staff by 29 percent in 2001 and another 18 percent in 2002. He also boosted sales incentives and focused attention on customer service, industry watchers said. A recovering tech economy helped, too. Klaus is a "street smart" business leader, said Mark Stewart of Stewart Securities in Irvine. His tough management style and pragmatism kept him on a steady course when the company was buckling under dwindling sales and freefalling stock prices in the late '90s. "He easily could have found another (company) when the chips were down," Stewart said, "but he weathered the storm." Klaus and other Epicor executives declined to comment. Klaus came to Epicor in 1996 from Frame Technology Corp., a San Jose company he led and restructured before Adobe Systems bought it. At Epicor (which went by the name Platinum Software until 1999), Klaus took over a company that sells software products that companies use to manage everything from sales and marketing to accounting and manufacturing. Most of its customers are midsize companies with revenues between $10 million and $500 million. Epicor was dealt a one-two-three punch in the late 1990s when stiff competition, falling sales due to Y2K fears and a slowing economy resulted in four straight years of losses ranging from $51 million in 1999 to $7 million in 2002. Klaus responded by cutting the workforce to about 800 at the end of 2002. He also kept pushing for new products. The company released more than 50 in 2003. After New Year's Day 2000 came and went without the expected Y2K disaster and the economy started turning around, so did Epicor. Klaus' efforts began paying off in 2003, when the company reported $9.3 million in net income, compared with a $7.3-million loss one year earlier. The positive trend has continued into 2004, with first quarter net income of $3.5 million, up from $2.6 million in the same quarter last year. Klaus earned the 2003 CEO of the Year Award from the Software Council of Southern California. He turned the company around "the old-fashioned way," said Rick Sharga, chairman of the council's Orange County chapter. "He believes that if you take care of your customers first and then your employees, you automatically take care of your shareholders," Sharga said. Klaus speaks "almost religiously" about customer service, Sharga said. He also never wavers from growing the company, even in bad times. Most recently, Epicor bought the Dutch business management and e- commerce software company Scala for $87 million, a purchase that expanded Epicor's international presence, Sharga said. Aggressive pursuit of growth and high-quality customer service have proven successful for Epicor in a market where many companies struggle to find the funds for the expensive and complicated software products needed to run their businesses, Sharga said. "He has a track record with companies that have good products but may need an upgrade in management skills," Sharga said. "There are lessons to be learned from him for other CEOs out there." |
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