Milton Hershey School, Trust Co. reach agreement with A.G.'s Office regarding organizational and governance reforms

By Jon Campisi | May 10, 2013

The Pennsylvania Attorney General’s Office has announced that it has reached an

The Pennsylvania Attorney General’s Office has announced that it has reached an

agreement with the Milton Hershey School and the Hershey Trust Company to implement organizational reforms and improve governance.

Highlights of the reforms agreed to by the parties include, but are not limited to, developing new rules to address concerns about overlapping board memberships; ensuring that no more than three school managers and directors may serve simultaneously on the board of directors of The Hershey Company; reducing board compensation; requiring that any future board compensation adjustment be subject to a pay study to be jointly conducted by an independent consultant and the Attorney General’s Office; adopting a new Conflicts of Interest Policy that requires directors to disclose “all actual or potential conflicts of interest” with the school or the company; and requiring the Hershey Company to implement a travel and expense reimbursement policy.

The school, which was established by the famous chocolate magnate of the same name in the early 1900s as a children’s orphanage, and presently serves as a residential facility for at-risk youth, was not found to be in breach of fiduciary duty, the A.G.’s Office announced, although the two-year investigation did examine allegations that the school trust assets had been misused for excessive board compensation and benefits, and that the school and company made questionable land purchases and unnecessary facility upgrades.

The Philadelphia Inquirer reported Thursday that the land purchase in question had to do with the buying and developing of an adjacent golf course and roadside market for a combined $17 million.

The settlement, submitted to the Dauphin County Orphans’ Court, is the third agreement between the charitable organization and the state prosecutor’s office in more than a decade related to governance reforms, the newspaper reported.

Attorney General Kathleen Kane said in a statement that she would 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. Their landmark generosity demands nothing less.

“The Milton Hershey School is an unparalleled resource for our Commonwealth and its disadvantaged youth,” Kane continued. “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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