Will the Hershey legacy of philanthropy endure?
Chocolate company’s reputation for twinning social purpose with profits under stress as foodmaker Mondelez eyes an offer
In photographs a smiling Milton Snavely Hershey was a vision of kindliness. Always mustachioed, often favouring a straw boater, his waistcoat strained at the buttons, Hershey exuded paternalism and, as the world quickly learned, a flare for outsized philanthropy.
He was given to nostrums: “One is only happy in proportion as he makes others feel happy.” And his care and worry about impoverished youth appeared to be exemplary for a businessman in his day, echoing the impassioned Joe Atkinson of the Toronto Star. The two were not far apart in age and saw up close the punishments of poverty and disadvantage.
How much of this is hagiography? It seems narratively fitting — pushing the bounds of fiction, almost — that Hershey was a candy man and not, say, an oil man like Rockefeller. He built an eponymous town in Pennsylvania designed to have “no poverty, no nuisances and no evil,” erected a hotel at the corner of Chocolate and Cocoa, established a trust to control his corporate interests and a school as the clearest sign of his beneficence.
The guiding principles of the Hershey Industrial School were clear: “Give as many boys as possible real homes, real comforts, education and training, so they become useful happy citizens” and “Eliminate any notion of institutional life and charity.” In 1933 Hershey amended the school’s charter to broaden the range of eligible students to “poor, healthy white male orphans” between the ages of 4 and 14.
(The school is now co-ed and extends through Grade 12.)
Hershey Co. has stood stalwart against some of the forces defining contemporary capitalism while growing its global presence
In the years since, the Hershey Co. has stood stalwart against some of the forces defining contemporary capitalism while growing its global presence through such acquisitions as B.C.-based Brookside Foods (dark chocolate enrobed cranberries etc.) and Krave Pure Foods (those ubiquitous transit ads for black cherry barbecue pork jerky) and making a bumpy expansion into China through candy maker Shanghai Golden Monkey.
Throughout, the company has maintained a singular reputation for twinning social purpose with profits, a statement that might sting the residents of Smiths Falls who watched sadly as Hershey closed up shop in the town long known as the chocolate capital of Ontario.
The question for Hershey now is whether the spurned takeover intentions of snack giant Mondelez International — a cash and stock offer of $107 (U.S.) a share and other “non-monetary considerations” — will prove a tipping point, despite Hershey’s terse statement that the offer “provided no basis for further discussion.”
What the Mondelez offer has done is highlight how Milton Hershey’s best laid plans became entangled in bureaucracy and high-level politics. The politics part surprises. Three years ago, Pennsylvania Attorney General Kathleen Kane announced an agreement with the Milton Hershey School and the Hershey Trust putting an end to double-dipping directors who sat both on the boards of the for-profit chocolate company and/or Hershey Entertainment and Resorts as well as the school and the trust.
An independent consulting firm was brought in to set new, lower compensation levels and the trust was directed to provide notice to the attorney general’s office of real estate transactions of more than $250,000, a nod to a still contentious golf course acquisition some years earlier.
In May of this year, the Philadelphia Inquirer reported on the “continuing chaos” at the charity, with the AG seeking the resignation of three of the school’s board members and probing “apparent violations” of the 2013 agreement. It’s a mess. The resignation of a Hershey Trust executive over the pocketing of funds in an unrelated FBI probe has added some sideshow colour. As has the pending trial of Kane over leaked emails in a grand jury probe, again unrelated to Hershey.
Through his will, Milton Hershey determined that the control of the school, and the capital stock in the chocolate company, would rest with Hershey Trust Co. That remains true today, with the trust controlling more than 80 per cent of the candy maker through Class B shares.
Here’s where it gets peculiar. In 2002 the trust was closing in on a sale of the chocolate company to Wm. Wrigley Jr. Co. The town of Hershey, as you would expect, was up in arms. What was unexpected was the intervention of the attorney general of the day, arguing that such a sale would do “irreparable harm” to the town and determining that the protection of property was the state’s right.
In September 2002, the trust, caving to pressure, announced that it was no longer looking for a buyer.
The town of Hershey today is on tenterhooks. Is a sale off the table? Will Mondelez make a second pass? The larger question is whether the legacy of Milton Snavely Hershey can endure as is, or whether his own careful ownership creation has undone what was meant to be benevolence at its best. jenwells@thestar.ca