San Mateo, Calif.-based Siebel said it canceled the options because it was concerned about diluting the value of its stock for other shareholders.
The canceled options represent all options granted to Siebel over the last four years, reducing Siebel's stake in the company from 13.5 percent to 10.7 percent. Siebel requested last June that the options be canceled, according to the company.
Siebel Systems has recently come under fire for its generous use of stock options to compensate its top executives and other employees, even as the company's sales and profits declined. The company faces a lawsuit brought by the Teachers' Retirement System of Louisiana last year, alleging Tom Siebel "knowingly certified inaccurate financial results" by failing to record expenses for options awarded to him and Siebel President Paul Wahl that were granted below the market price. The company claims the suit has no merit.
The company said the cancellation of Siebel's options will not have an adverse affect on its bookkeeping.
Last fall, Siebel Systems allowed some 3,400 employees to"underwater" stock options for cash or stock, resulting in the cancellation of 28 million shares underlying its employee stock option program. A stock option is underwater when the strike price is higher than the current value of the stock.
In Wednesday's filing to the Security and Exchange Commission, the company said these actions are part of an adjustment to its compensation structure to significantly reduce the number of options granted to new and existing employees.
Siebel Systems makes a top-selling set of business applications designed to streamline corporate sales, marketing and customer service activities, a market known as customer relationship management. The company reported more than $2 billion in sales in 2001.