Hershey Trust Reaches Tentative Deal on Governance Reform

The Hershey Trust, chocolate maker Hershey Co.'s largest shareholder, has reached a tentative agreement with the Pennsylvania attorney general's office to reform its governance practices, the Wall Street Journal reports.

The $12 billion trust, which also runs the Milton Hershey School, a cost-free, private coeducational school for low-income students, has been under investigation by the attorney general's office over allegations of excessive compensation, lavish expenses, and conflicts of interest among board members. According to the Journal, the trust and the AG's office are in the process of drafting a legal document outlining the terms of the agreement, which includes new term limits and enforcement of a compensation cap for board members, as well as the resignations of some board members at the end of the year. Four board members of the trust have resigned over the past several months.

Industry experts told the Journal that the changes and the prospect of an almost entirely new board at the trust in 2017 could give potential bidders an opening to try to buy Hershey. With a roughly 30 percent stake in the company and 81 percent of the voting shares, the trust will play a key role in any future sale of the company. Recently, Hershey's corporate board, which includes three members of the trust's board, unanimously rejected a $23 billion bid from Mondelez International, and any future offers would require the approval of the trust as well as the attorney general's office. According to some experts, a sale of the company could benefit the Milton Hershey School by diversifying the trust's assets and generating higher returns on its stake in the company.

"We have reached an agreement in principle and are working on the final details in productive discussions with the office of the attorney general," a spokesperson for the trust said in an e-mailed statement.