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According to the Financial Times, the proposals are controversial as they could stoke a long-standing debate about pay practices that pitted Wall Street against Silicon Valley in 2000.
News of the move coincided with a report on the company's earnings that showed that search advertising was the silver lining of the technology industry in the final quarter of 2008.
The new option will allow Google employees with "underwater" stock options to swap them for new options at existing prices.
Eric Schmidt, Google's chief executive, commented: "Would you prefer we had the Wall Street firm's bonus model? That doesn't seem a very good model to me.
"Part of the compensation here is stock - it's how it happends in tech, it has to have some value in the long term."
New figures have shown that Google has bukced the trend in th economic downturn by recording an 18 per cent increase in total revenue, including the commission it pays to third-party sites to drive traffic.
