We analyze the effects of takeover defenses and golden parachutes on the incentives and compensations of target managers, and whether they lead to higher premia for selling shareholders. We find that the effect of these instruments on shareholder wealth is negative. While defenses align managerial incentives with those of shareholders by creating job stability and insurance, they also reduce expected premia because fewer takeovers occur. Although these two effects compensate each other, the cost of undoing the defenses is internalized by selling shareholders, who are then overall worse off. Golden parachutes provide insurance, but do not align incentives.