Siebel Systems Inc. founder and chief executive Thomas M. Siebel, sued by shareholders who are unhappy with the size and accounting of his stock option package, gave up the right to buy 26 million shares, all the options granted to him since 1998.

In a filing today with the Securities and Exchange Commission, the company valued the options given up by its CEO at $56.1 million. But the bulk of the options are "underwater," meaning they are priced higher than what Siebel's stock currently trades for. Only 6 million of the 26 million shares are in the money, company spokesman Pat Dillon said.

The executive, whose worth was estimated at $1.2 billion by Forbes magazine, has sold more than $950 million in stock since 1996, according to Bloomberg News, but still owns about 10.7 percent of the company, down from 13.5 percent. He has taken a salary of $1 per year for the past two years.

Peter Oppermann, a senior executive compensation consultant at Mercer Human Resource Consulting, said he expected to see other executives cancel their options to reassure investors that they are managing their companies in a shareholder-friendly manner.

"You may see other CEOs whose options are underwater doing this," he said. "But if you think about it, they are not really giving anything up because the options are not of any current value."

The Teachers Retirement System of Louisiana filed suit against Siebel Systems, the world's largest maker of customer service software, in November over the number of options granted to Siebel. It said the company failed to properly record expenses for the options.

Options guarantee employees the right to buy shares at a fixed price, set at the time the options are awarded, regardless of how the shares are trading on the open market.

Options became an increasingly popular part of corporate compensation packages, particularly at cash-poor technology companies, during the stock market boom of the late 1990s. But institutional investors and other corporate governance advocates have been critical of options, saying they dilute the value of outstanding shares and represent a cost that companies should, but generally do not, count against earnings. They also say options encourage executives to focus on short-term stock performance rather than the long-term health of a company.

Company spokesman Dillon said Siebel's decision to surrender his options had nothing to do with the Louisiana lawsuit but was in line with other steps the company has taken recently to reduce the number of outstanding options and to further align executive compensation with company performance. Siebel informed his board in June that he would cancel his options, the SEC filing said.

Siebel Systems' stock has suffered recently based on weakening sales. Shares in the San Mateo, Calif., firm closed at $8.39 today, well below the 52-week high of $38.38. They once traded as high as $80.

The company has also given other employees the chance to exchange underwater options for cash or restricted stock.

Executive-compensation consultant Pearl Meyer, however, said she has not yet heard about other CEOs who plan to cancel their own options or those of other senior executives.

Thomas M. Siebel, chief executive of Siebel Systems Inc., surrendered stock options on 26 million shares worth $56 million.