$34.8M pay package makes Flagstar CEO Long Island's top-paid public executive

A nascent turnaround at Flagstar Financial Inc. resulted in a $34.8 million compensation package for CEO Joseph Otting, making him the highest-paid executive of a Long Island publicly traded company in 2024.

The median compensation for the 10 top-paid executives rose 37% last year to $10.9 million, according to a Newsday analysis of Securities and Exchange Commission filings. By comparison, the median pay for all Long Island workers increased 4.2% to $59,418, just above the 3.8% inflation rate for the metropolitan area last year. 

Most executive pay came in stock-based awards, such as multimillion-dollar grants of options tied to company performance, according to Newsday's analysis.

Otting’s package included $31.5 million in options that vest over three years.

“With a stock option, the executive will only realize value if the stock price increases from the date of the grant, and so there’s some built-in performance there and alignment with the shareholders,” said Kelly Malafis, a founding partner of Manhattan-based Compensation Advisory Partners, which advises corporate compensation committees on pay packages.

But because most employees don’t receive stock options — and certainly not in the amounts CEOs are awarded — the practice widens the gap between executives and rank-and-file workers.

“It again comes down to the uniqueness of the American corporate culture where the top small group gets paid very high,” said Anoop Rai, a professor of finance at the Frank G. Zarb School of Business at Hofstra University.

He said the size of executive packages “has led to this huge inequality between the line worker and CEO.” Rai noted that CEO-to-worker pay gaps are typically far smaller abroad. Toyota CEO Koji Sato, for example, earned about $5.6 million at the Japanese company in 2024 — less than any of Long Island’s 10 highest-paid executives. “And he sells more cars than everybody else in the world,” Rai said.

Flagstar's 'urgent circumstances' motivated exec pay

The list of Long Island’s top-paid corporate leaders includes 162 executives, most in “C-suite” roles such as chief executive, chief operating officer and chief financial officer. Their median compensation was $857,743. Median means half earned more and half less.

Three of Long Island’s 10 highest-paid executives — and five of the top 12 — work at Hicksville-based Flagstar, the fourth-largest Long Island public company by revenue. Each had a package of at least $5.8 million, reflecting a stock surge following the bank’s early-2024 crisis.

On Feb. 29, 2024, after disclosing “material weaknesses” in its loan review processes, NYCB restated the loss to $2.7 billion and said CEO Thomas Cangemi had resigned “effective immediately.” Six days later, Otting — a longtime bank executive and former comptroller of the currency in the Trump administration — was announced as CEO.

In an SEC filing earlier this year, Flagstar said “the urgent circumstances” in 2024 “created an immediate need to assemble a talented management team to drive the company’s turnaround.” Its compensation plan, the filing said, “was critical to achieving this objective.” The company declined to comment further in response to requests from Newsday.

NYCB was the parent company of 10 bank brands including Roslyn Savings, a Long Island fixture since 1875. All of NYCB’s banks were rebranded Flagstar Bank in February 2024. NYCB changed its corporate name to Flagstar Financial in October 2024.

As part of its turnaround strategy, Flagstar has laid off about 700 employees, or 8% of its workforce, and closed about 60 branches, including six of nearly 40 on Long Island, according to federal data. It now operates about 340 branches nationwide. The company has posted net losses for seven straight quarters, though Otting last month forecast a return to profitability in the fourth quarter.

Otting’s pay package gave Flagstar the widest pay gap between a Long Island CEO and their median employee in Newsday's analysis. The bank reported median worker compensation of $74,960, producing a CEO-to-employee pay ratio of 464-to-1. 

That means the median Flagstar employee would need 464 years to match Otting’s 2024 compensation. Eighteen Long Island companies disclosed CEO pay ratios last year. Collectively, they had a median ratio of 84, roughly the same as the national median of 87, according to a University of Alabama database of 2,560 companies. But the gap is widening: the Long Island median was 64 in 2023.

For bigger companies, the disparity is typically larger. The median ratio for S&P 500 companies last year was 199. In 1989, before stock options became common, the typical CEO earned 45 times a median worker’s pay, according to the Economic Policy Institute, a Washington think tank critical of high CEO compensation.

“Many of these companies’ median pay has been either stagnating or even declining, and companies have that kind of model at their peril,” said Sarah Anderson, director of the Global Economy Project at the Institute for Policy Studies, another Washington-based think tank that tracks executive compensation. “Extreme disparity does tend to undermine employee morale and boost dissatisfaction.”