A new broom

Rival management teams compete in the market for corporate control for the right to manage shareholders’ assets. The benefit that shareholders receive from this competition depends on the strength of the board of directors. The board affects the outcome directly due to its role during the takeover process and indirectly due to its role beforehand when it specifies the golden parachutes that the incumbent management team receives when a change in management occurs. This chapter uses the takeover of Anheuser-Busch by the global brewer InBev, and the sweeping changes that followed, to introduce the market for corporate control. It explains how a firm’s shareholders can benefit from performance improvements made well after they have sold their shares, as well as how they can benefit even if a takeover never takes place.