“That’s why Carlos resigned,” said a person close to Modelo. “He couldn’t be on the Anheuser-Busch board and be talking to InBev. He just couldn’t. And we wanted both Anheuser-Busch and InBev to know that we were talking to each of them.”
That left Anheuser’s board with 13 members. And despite the commonalities that stemmed from their interwoven pasts, they hadn’t all arrived that morning with their battle-readiness set to the same level.
Hugh Shelton, or “The General,” as he was often called, joined the board in November of 2001 at age 59 after retiring as chairman of the U.S. military’s Joint Chiefs of Staff. “He knew a lot of soldiers who drank a lot of beer,” one advisor said, and he had certainly faced more pressure during his two tours in Vietnam and while serving under Presidents Bill Clinton and George W. Bush than he ever did at Anheuser-Busch. He had even been knighted by Queen Elizabeth II. Highly technical business matters weren’t Shelton’s area of expertise, however, and he was relatively restrained during the board’s sessions. “This was not his kind of battle,” another Anheuser insider said.
Two women served as directors of Anheuser-Busch. One, Joyce Roché, had known The Third from their work together on AT&T’s board, and had been a director of Anheuser for 10 years. She spent most of her time working as the head of Girls Incorporated, a non-profit, but she had been a personal care executive before that and was Avon’s first African-American woman vice president.
The other female director, an attorney and former president of the Mexican American Legal Defense and Educational Fund named Vilma Martinez, had served on the board for 25 years—more than half of August IV’s lifetime—and was the longest-tenured director aside from August III. Almost exactly a year after the InBev takeover rumors hit, President Obama named Martinez as the U.S. ambassador to Argentina.
Roché and Martinez conducted themselves professionally, and despite the length of time they had known The Third, seemed quite supportive of Anheuser’s new management team under August IV. Martinez was more willing to challenge August III’s viewpoints than most of her colleagues. “Sweet, bright, and tough as nails,” one person close to the board said, in reference to Roché. “She would have fought.”
Shelton and Ambassador Jones, who was also a former chairman and CEO of the American Stock Exchange, ranked in that category, too—and they had their reasons. Anheuser-Busch had long been a huge supporter of the American military, for example, which made Shelton proud. He knew there was no way the Brazilians and Belgians would throw so much money toward the U.S. armed forces. They also valued Anheuser’s legacy as the last major American-owned brewer, its family-owned history, and its philanthropic endeavors. “I didn’t want to sell to begin with, because I thought we had a very good company that was really not only responsive to shareholders but to employees and the communities we served,” said Ambassador Jones.
A clear fissure ran down the middle of the board, however, separating a handful of the most business-savvy members, who were generally the most plugged in with August III, from the rest. A few factors helped delineate between the two groups, and one was how important Anheuser’s paycheck was to each director’s overall lifestyle. The fees the company paid, which usually totaled somewhere between $88,000 and $114,000 a year, mattered more to Shelton, for example, after three decades of service in the U.S. military, than they did to the astronomically wealthy Ed Whitacre or Andy Taylor.
Another factor reeked of elitism—the board’s balance of power also loosely pitted those who were members of the exclusive Augusta National Golf Club, host of the legendary Masters Golf Tournament each year, against those who weren’t.
Augusta is famous for its pristine links and high-powered membership roster, which has boasted bold-faced business and political names including Warren Buffett, retired General Electric chief John “Jack” Welch, Microsoft founder Bill Gates, retired Morgan Stanley head Philip Purcell, auto magnate William C. Ford, legendary IBM chief Louis Gerstner Jr., and August III’s brewing rival Peter Coors.
The Georgia golf club is also infamous for the people it doesn’t include—women. Women’s groups and the media have repeatedly skewered Augusta for having no female and few African-American members, and Tiger Woods, a Masters winner and honorary Augusta member, said during one round of controversy that the club should admit women. Augusta, however, maintained throughout that time that it did not restrict based on race, gender, religion, or national origin.
The figurehead of the Augusta group on Anheuser’s board was Augusta’s chairman, William Porter “Billy” Payne. The well-connected Payne, who helped Atlanta win its bid to host the 1996 Olympic Games, had a great deal of influence among golf aficionados. He was relatively inactive on Anheuser’s board and rarely spoke during deliberations. When his jet arrived late for one critical board meeting, he stepped nonchalantly down the stairs with a newspaper tucked under his arm, his wife two paces behind him, dressed in a yellow suit and toting her Kindle, as the rest of the group watched. “I don’t remember anything about him in meetings. I don’t remember him saying a word,” said one of Anheuser’s advisors. “But he was a fun guy to talk to around the danishes when there wasn’t a meeting going on.”
The “Augusta connection” on Anheuser’s board mattered more because of the other directors it involved. Three of the board’s most influential members belonged to the golf club—former banker Sandy Warner, former telecom chief Ed Whitacre, and Vernon Loucks, a former healthcare executive. While their golfing buddies spent the early summer of 2008 on Augusta’s Bermuda grass tee boxes, these three played key roles in dictating the future of Anheuser-Busch. “There was a split between those who were members of Augusta and those who weren’t—almost a split along those lines,” said one of the company’s advisors. “I was told, ‘Follow Augusta.’ ”
Sandy Warner served as the leader of the group of independent directors, after having rotated into the role according to the board’s practice. Warner fancied himself a deal maker to an extent, and not without reason. After being named as the youngest CEO in J.P. Morgan & Co.’s history, he helped engineer its $30.9 billion sale to Chase Manhattan Bank in 2000, creating one of the few banks that emerged intact from the global financial crisis of 2007 and 2008. Warner had also been a director at General Electric for 16 years and had more recently joined the board of Motorola. He was generally regarded as an honest broker who did his best to navigate Anheuser’s sticky issues.
Ed Whitacre’s pedigree was similarly lustrous. He had come a long way from his hometown of Ennis, Texas, a small burg at the edge of a railroad where his dad had worked as a railroad engineer. Whitacre got his start in the telecommunications industry one summer during college, when he—the first member of his family to make it to a university—begged for a job hammering in fence posts and measuring telephone wire for Southwestern Bell in Dallas. Nearly three decades later in 1990, he took over SBC, the smallest of the Baby Bells, and transformed it into a giant by acquiring companies ranging from other Baby Bells to Ameritech, which he bought in 1999 for $62 billion. In 2005, SBC bought AT&T and adopted its name.
Like August III, Whitacre still had plenty of backwater in his blood despite rising to such heights in corporate America. He hated using computers and e-mail, hadn’t started golfing until his mid-40s, and professed that his favorite activity was using his tractor to dig holes and crush trees on his suburban San Antonio ranch. At six-foot-four, his friends and colleagues called him “Big Ed.”
Whitacre was not a shrinking violet—he had a strong sense of his own abilities. That self-confidence became apparent after the Anheuser saga ended when he agreed to become CEO of recently bankrupt automaker General Motors to help lead it out of the U.S. government’s debt, despite acknowledging when he initially became the company’s chairman that he knew nothing about cars. Whitacre had already popped up on national television by that time as the star of a GM ad campaign that offered a 60-day satisfaction guarantee for car buyers. The commercials w
ere reminiscent of the 61 commercials Lee Iacocca filmed for Chrysler following its government bailout, but they were not nearly as successful. The public’s reaction actually harked more to the lukewarm reviews August III had received for his own commercials at Anheuser-Busch.
Whitacre was a leader in the Anheuser-Busch boardroom, but that was because he commanded reverence, not because his behavior was outwardly estimable. He didn’t talk much, but when he did, the board listened. Whitacre’s muted behavior irked some Anheuser insiders who felt that he should have been more vocal, given the depth of his experience. “He was conspicuously quiet in the board meetings,” said a person who attended the sessions. Other board members, like Sandy Warner, Jim Forese, and The Third, would ask questions periodically or make substantive comments. “But Whitacre was silent,” this person said, “which made you feel a little bit that he had already kind of figured out where he wanted to go with it. I was actually disappointed that a guy as well known and well thought of as him wasn’t more vocal in stating what he thought of things and being more open and up front about it.”
InBev, unbeknownst to Anheuser, had accurately pegged Whitacre and Warner as two of Anheuser’s most financially sophisticated directors and was tailoring its outreach efforts to them. After so many years at the helm of public companies, both men understood the concept of fiduciary duty, which dictated that their primary responsibility was to preserve or increase the company’s value to benefit its shareholders. With that mandate in mind, InBev felt Warner and Whitacre couldn’t ignore an offer of $65 per share when the company’s stock had recently been trading in the low $50s.
Warner and Whitacre were broadly viewed as the board’s most powerful members—not counting “insider” August III. To help temper The Third’s influence, the board opted to have the pair represent the entire group at critical points. “We designated them to go do a lot of the work for us,” said fellow director Jim Forese. “We said ‘Hey, Sandy, you and Ed take the lead here. ’ Which is what you normally do when you’ve got a complicated situation.”
Several other directors also helped flesh out the group’s inner circle. Vernon Loucks Jr., the former chief executive of healthcare company Baxter International and founder of healthcare-oriented management firm The Aethena Group, was a deal-savvy director who held significant sway because of his background and longevity on the board. Loucks had become an Anheuser-Busch director in 1988, the same year as fellow Augusta member Whitacre, and was a thoughtful and rational businessman who was used to being on the “inside”—he was inducted while at Yale University into its secretive Skull and Bones society. He had served on more than a handful of other boards in recent years, including the boards of Quaker Oats and St. Louis- based Emerson Electric, and had actually undergone a few mergers of his own. Baxter bought American Hospital Supply Corp. in 1985 and later spun off several divisions, and Aethena had formed an alliance with an investment firm in 2001. Loucks, however, wasn’t seen as someone who would agitate for a fight. “He wasn’t a spear-carrier,” said one person close to the matter. “He would go with what made the most sense.”
Enterprise’s Andy Taylor wasn’t a member of Augusta, but he was still considered to be in the loop. Since The Third had bowed to criticism and slowly eliminated most of the St. Louis acolytes who once populated his board, Taylor was the group’s sole remaining local connection aside from the two Augusts and Stokes. “He’s a buddy of August III, from St. Louis, and was concerned about St. Louis, but he certainly was not against selling the company,” said one Anheuser advisor in reference to Taylor, who wasn’t overly vocal in most of the board’s meetings. As one former top executive put it, “The only people who mattered in this whole damn thing were Sandy Warner, Andy Taylor, probably Vernon Loucks, and Ed Whitacre.”
Another director who pulled a good amount of weight, however, was Jim Forese, the one member who had been named during Pat Stokes’s tenure. Forese asked astute, probing questions, and he seemed willing to entertain a fight with InBev if it made sense. He also had an interesting connection to the bankers at Citigroup: His son, James A. Forese, had a heavy-hitting job as co-head of the bank’s global markets unit, which managed all of its sales and trading functions, and sat just down the hall from Leon Kalvaria. Some of James Sr.’s effectiveness on the board of Anheuser-Busch, however, was tempered by the fact that he hadn’t been on the scene as long as the rest of his colleagues. “I wish, quite frankly, that he had been a little stronger, because I think his heart generally seemed to be in the right place,” said one company advisor.
Those four or five “outside” directors held the keys to Anheuser’s future. Only one man, though, made a habit of seizing control of the boardroom and steamrolling the debate, and that was August III, the group’s consummate insider. He encouraged other board members to speak their minds, and at points would call on people he felt were too quiet. The ability he had to cajole them into adopting his point of view was both awe-inspiring and, to those who had differing views, maddening.
“No one overtly ever wanted to take The Third on,” said one Anheuser insider. “This guy was so used to everybody in and around St. Louis, and certainly at Anheuser-Busch, just genuflecting to him. His whole life had been everybody kowtowing to him. The fact that his nickname was The Chief—he wouldn’t even know how to deal with somebody unless they bent to his will. God knows what he thought of anyone who didn’t.”
The Third’s small ownership in Anheuser-Busch hardly seemed to matter. The imposing force of his personality was enough to overpower anyone else in the room. “This was a family-controlled corporation where they only had 4 percent of the stock,” said one company advisor. “I mean, the force of personality to let that happen ...”
Goldman Sachs’s Tim Ingrassia had never met The Third before the first board meeting he attended. It was clear as the former chief jumped down from his helicopter and stalked into the boardroom, even before he spoke, that he possessed a strange kind of magnetism. “Watch this guy work the room,” Ingrassia said, leaning over toward Peter Gross as they waited for the meeting to start.
August III sat down and began canvassing the group, looking from one person to the next. He’d catch someone’s eye and then—there it was—he’d wink or nod in his or her direction. And damned if that person didn’t immediately sit up straighter or adjust his tie. The Third, whether consciously or not, was quietly establishing himself and asserting his superiority.
As Gross and Ingrassia watched the scene unfold, The Third turned unexpectedly toward Ingrassia and gave him a little wink as well. Ingrassia sat up in his chair and puffed out his chest before he could catch himself.
“You’re doing it!” an incredulous Gross hissed at his colleague.
The Third knew how to work a room, but he seemed to feel it was more effective to lobby people individually if he was looking for a certain result. There weren’t many places to hide in the airplane hangar, but he was skillful nonetheless at pulling people into the coffee room or hallway for furtive pow-wows. One advisor compared him to Lyndon Johnson during Johnson’s days as a highly effective Senate Majority Leader in the 1950s, when he was photographed several times giving other senators the “Johnson Treatment”—leaning so aggressively into them while making a point that they nearly toppled backward.
“That, right there, captures the man,” the advisor said. “He spoke very rarely in open forums, but would talk to them in the bathroom, in the copy room, holding small conferences at the end of hallways. This whole thing played out in the airport hangar over a course of weeks. It was not happening out in front.” The Third was a behind-the-scenes coalition builder, and his preferred style of negotiation was one that sapped power away from others. When bilateral deals are cut one-on-one, no one else knows the context of the talks or the nature of the result. The Third seemed to understand the value of leaving other people guessing as he strategized and polled for votes.
“He’s a consensus builder, but he does it behind
the scenes,” the advisor said. “A lot of what he did took place behind the scenes. I don’t think he left a lot to chance, let’s put it that way. I don’t think he would walk into a room without knowing what people thought beforehand.”
The Third has often been described as a “charismatic” figure, but begrudgingly. “The Third is the most impressive person on the board,” said one person close to the company. “He was hugely charismatic, intelligent, powerful. Whether his powers were being used for good or evil, as some might say, he was impressive as an individual. He had his hands around everything. You knew he was working everyone.”
Others argue that his success had less to do with charisma and more to do with sheer intimidation. “When The Third was challenged, he wouldn’t even look at you,” one advisor said. “This guy was a classic schoolyard bully. If he could intimidate you, he would intimidate you, and he would bust the crap out of you. If you kind of pushed back against the guy, he would pretend he didn’t hear it and wouldn’t take you on. He literally didn’t want to deal with somebody unless he could intimidate them. And I was just so disappointed that that’s who the great August Busch III was.”
“The Third was, for such a long period of time, the head of that company, and he really ran that company with a fairly iron fist. The board was essentially people he knew well,” this person continued. “Those were really long and strong relationships. So when he came into the room, he cast a pretty big shadow. I didn’t really find him to be charismatic or to be very candid. I found him at times to be much more rigid and agenda-oriented than others, and at times I regretted that because it was not the most helpful dynamic. He was so unbelievably opinionated about any issue that came up.”
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