All About Estates

A Chocolate Covered Trust Company

Periodically I look to our neighbours to the south for examples of lessons learned. I found the following example of a Trust situation that was close to going off the rails.

The Hershey Company, commonly called Hershey’s is the largest chocolate manufacturer in North America. Hershey’s was founded by Milton Hershey in 1894. At present the Hershey Trust Company is the majority owner of Hershey’s.

The Hershey Trust Company was founded by Milton Hershey in 1905. The primary purpose of the $12.3 billion Trust Company is to act as Trustee and support the Milton Hershey School in Hershey, Pennsylvania which was founded by Milton and his wife Catherine in 1909. The school was originally open for orphaned boys, however, it is now welcome to boys and girls provided they come from families at or near the poverty level. By most accounts that school is very successful. More than 2000 children attend the school which begins with kindergarten and goes through grade 12, and approximately 90% go on to obtain further education.

I should note that in addition to overseeing the funding of the School, the Hershey Trust Company operates a Foundation whose mission is to provide cultural and educational opportunities to the local Hershey community.

The Hershey Trust Company is run by Board members, many of whom held their positions for well in excess of 10 years. Some might say that the annual stipend they received was large but in addition, several of the Board members also received significant compensation for serving on the Board of the Hershey Company (which has been a major investment held by the Trust). None of this is technically wrong. The time, expertise required and responsibility of the role warrant some level of compensation.

At some point, during the past couple of years the Board agreed to purchase a golf course. It may not be a coincidence that not long after the news of the golf course purchase became public, the Pennsylvania Office of the Attorney General began making some inquiries (charities in many jurisdictions are accountable to Offices of the Attorney General). Clearly the inquiries were serious, as they resulted in an agreement, dated July 29th, 2016, between the Office of the Attorney General and the Hershey Trust Company as Trustee of the Milton Hershey School Trust. A couple of the outcomes from the agreement included a requirement to improve governance practices (standards for Board member recruitment and maximum terms) and to renew a Conflict of Interest Guideline policy. As well there was an explicit requirement to properly enforce Board member travel and expense reimbursement policies. In addition on a go-forward basis, an annual written report is to be filed to the Pennsylvania Attorney General’s Office about the economic and academic characteristics of the children attending the school, which, after all, is the main purpose of the School and the Trust.

The lesson to be learned is that long term Trust structures can lose focus if they are not set up with proper accountability and transparency. In this instance, a government office stepped in to provide the oversight. Large, complex trust files should be handled with care, especially in the planning stages. I strongly encourage the use of experienced, professional advice when creating a lasting legacy.

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About Paul Fensom
Scotiatrust offers a full range of estate, trust and philanthropic advisory services designed to meet a client’s personal objectives and designed to evolve across a variety of life stages and financial events. Email: