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The Cost of Shareholder Activism: LVB Sh...

Varkkey, Biju, Sha...

Case

The Cost of Shareholder Activism: LVB Shareholders Vote Out Management

Varkkey, Biju; Shah, Virangi

IIMA-HRM0249 | Published March 25, 2021 | 12 pages Case

Collection: Indian Institute of Management, Ahmedabad

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Lakshmi Vilas Bank (LVB) was established as a private sector bank in 1926 in Tamil Nadu. It was set up to serve the financial needs of the people working in small and medium-sized enterprises (SMEs). LVB got into trouble after shifting focus from funding SMEs to funding big corporates. Initially, it made profits; however, corporates' default hit the bank. LVB also made efforts to merge with various entities, but to no avail. Meanwhile, Institutional Investor Advisory Services published an article capturing LVB's poor corporate governance. The article triggered shareholder activism, thereby creating a leadership vacuum. The case highlights the impact of shareholders activism on LVB's management.

Identify the role of shareholders and regulators in governance-related decision-making processes of companies particularly banks. Bring out prevailing conflict of interest among various stakeholders. Shareholder activism with respect to HRM issues. How proxy firms influence shareholders decision making power.