Edward Evans is a managing editor with Bloomberg Gadfly. He is former managing editor for European finance at Bloomberg News.

Deutsche Bank co-CEO John Cyran's admission that bonuses don't work is long overdue -- but risks coming back to hurt him.

Deutsche Bank Tumbling

Here's what he told a conference in Frankfurt on Monday:

 "I sit on trading floors and wonder what drives people. I don’t fully empathize with anyone who says they turn up to work and work harder because they can be paid a little bit more, but that may be a personal view.''

Saying he doesn't understand the people in his firm's biggest revenue generator isn't going to endear him to many employees. They are themselves facing uncertainty as the lender eliminates 9,000 jobs over the next three years. He may be setting himself up for a clash with his own investment bank -- something "Saint" Antony Jenkins found terminal to his career as Barclays CEO.

It also looks odd from a man who has himself been offered a bonus, and is likely to be earning millions, to criticize such payments. His package hasn't so far been disclosed but his predecessors earned about 6.6 million euros ($7 million) in salary and bonuses.

“I have no idea why I was offered a contract with a bonus in it because I promise you I will not work any harder or any less hard in any year, in any day because someone is going to pay me more or less,'' he said.

If he hasn't already done so, Cryan really needs to turn that bonus down. And his remuneration committee should ask why they offered it in the first place to someone who takes such a dim view of the practice.

Even so, his analysis is spot on -- if unoriginal. Other bank CEOs, such as Morgan Stanley's James Gorman, have also complained compensation is too high.

Pay is the most stubborn fixed cost at European investment banks and is dragging down profitability as revenue dwindles. Deutsche Bank posted its biggest quarterly loss in a decade in October, and the stock has fallen 29 percent since its high in April. Traders need to share more of the pain with shareholders.

Cryan says, correctly, that the structure is still wrong because it rewards employees too quickly. Even after European Union efforts to limit bonuses and impose claw-backs, the incentive is still too short-term. 

The Deutsche Bank boss is right when he talks about the “promise to pay first and then be in the ridiculous position where the baby’s been given the candy and you’ve got the difficulty of taking it away.”

He should now demonstrate the courage of his own convictions. If bonuses don't do it for him personally, and he can't understand why they motivate employees, he should replace them.

Deutsche Bank could be the first to abolish cash bonuses and start to reduce incentive pay. For too long, shareholders have lost out to demands from employees to raise pay and regulators to bolster capital reserves.

In fairness, Deutsche Bank has already been cutting bonuses: variable compensation at the securities unit fell 20 percent to 1.7 billion euros in 2014. Cryan plans to reduce the pool by a further 500 million euros, people familiar with the matter told Bloomberg News last month.

But he needs to be bolder and to develop a different structure to pay his bankers. If Deutsche Bank is such a turnaround case, surely bonuses should only take the form of stock options that vest after a number of years. 

And investors need to focus on Cryan's progress in reviving the bank's lackluster performance. Attacks on his own employees shouldn't distract attention from the CEO's performance. Even if he does turn down that bonus.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

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