“In Part One of this series (Tales of Cobras, Windows, and Economic Promise), we discuss the ‘cobra effect. It is a term that derives from a venomous cobra outbreak in India. We chose this tale to exemplify how solutions to problems, on occasion, have the opposite of the intended effect.
In this article, we present a two-headed cobra effect. First, government legislation designed to limit executive compensation and second, the influence of economists and academia to base executive compensation on “performance.”