Kathleen G. Kane - Pennsylvania Office of Attorney General - Protecting Pennsylvanians

   

May 8, 2013

AG Kane announces reform agreement with Milton Hershey Trust and Milton Hershey School

HARRISBURG- Attorney General Kathleen G. Kane announced today that her office has reached an Agreement with the Milton Hershey School ("MHS") and Hershey Trust Company ("HTC") to implement certain reforms that will both better serve MHS's mission -- specifically to nurture and educate children in social and financial need -- and improve HTC's organizational governance.

"Milton and Catherine Hershey were visionary philanthropists who cared deeply about children in need," said Attorney General Kane.  "These reforms will help ensure that the Hersheys' goal of providing a stable home and quality education to disadvantaged children can continue for generations to come."

Highlights of the reforms agreed to by the Office of Attorney General ("OAG") and HTC are as follows:

  • New rules to address concerns about "overlapping" Board memberships. MHS Managers / HTC Directors  will no longer serve simultaneously on the boards of both The Hershey Company and the Hershey Entertainment and Resorts Company.
  • No more than three MHS Managers / HTC Directors may serve simultaneously on the Board of Directors of The Hershey Company. 
  • No more than one MHS Manager / HTC Director may serve on the Hershey Entertainment and Resorts Company Board at the same time. 
  • New, reduced Board compensation levels were formulated by an independent compensation consulting firm, which determined that the new pay levels were on the "low end" of compensation paid by comparable institutions nationwide. 
  • Any adjustment to Board compensation levels in the future will be the product of a pay study to be conducted by an independent consultant selected by HTC with input from the OAG.
  • On conflicts of interest, HTC has adopted a new Conflicts of Interest Policy that requires Directors to disclose "all actual or potential conflicts of interest" with MHS or HTC.  The Conflicts of Interest Policy cannot be modified or amended without the prior written approval of the OAG.
  • MHS / HTC shall provide written notice to the OAG at least thirty (30) days prior to all real estate transactions involving either: (i) a lease of three or more years or (ii) more than $250,000 of consideration.
  • With respect to the appointment of MHS Managers / HTC Directors, the Agreement requires that best efforts will be used "to identify for election to (the Board) individuals whose education, training and experience reflect the full range of the Board's responsibilities, including . . . at-risk/dependent children; residential childhood education; financial and business investment; and, real estate management."
  • HTC will implement a "Travel and Expense Reimbursement Policy" that ensures that Board travel, meeting and entertainment costs are carefully controlled and documented.  For example, the Travel and Expense Reimbursement Policy mandates the use of "coach class" airfare for all airplane travel.

In addition to the implementation of the reforms discussed above, Attorney General Kane also announced that a lengthy and thorough investigation of HTC's administration of the Milton Hershey School Trust concluded without a finding of any breach of fiduciary duty.  The investigation took approximately two years and examined, among other things, allegations that School Trust assets had been misused for excessive board compensation and benefits, questionable land purchases, and unnecessary facility upgrades.

"As with all Pennsylvania charitable trusts, my office will continue to diligently monitor the activities of the School Trust to make sure that the use of trust assets is entirely consistent with Milton and Catherine Hershey's donative intent," said Attorney General Kane.  "Their landmark perpetual generosity demands nothing less."

Going forward, the OAG will receive annual written reports on HTC's compliance with the terms of the Agreement setting forth the reforms, as well as direct access to additional materials, information and personnel as the OAG may request in connection with performing its oversight responsibilities.  Finally, Attorney General Kane announced her intention to visit MHS in the near future.
 
"The Milton Hershey School is an unparalleled resource for our Commonwealth and its disadvantaged youth," said Attorney General Kane.  "I intend to visit the school so that I can meet students, teachers and staff and gain a firsthand understanding of the institution's strengths, as well as any areas needing improvement.  I look forward to a new era of openness and collaboration to achieve the best possible outcomes for children in need." 

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Click here for a copy of the OAG's Orphans Court filing.
Click here for a copy of the Agreement between the OAG and MHS / HTC.
Note: the newly adopted Conflicts of Interest and Travel and Expense Reimbursement Policies are included as exhibits to the Agreement.