(Harrisburg) -- The state Attorney General and the Milton Hershey School have reached an agreement to implement reforms at the school for underpriviledged children.
Attorney General Kathleen Kane says a lengthy investigation of the Hershey Trust Company's of the school has concluded without any finding of a breach of fiduciary duty. The probe took approximately two years and examined things like allegations 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 the use of trust assets is entirely consistent with Milton and Catherine Hershey’s donative intent,” Kane said in a statement. “Their landmark perpetual generosity demands nothing less.”
“The Board is undertaking this action as part of its continuing effort to better serve needy children in perpetuity,” said Robert F. Cavanaugh, Chairman of the Milton Hershey School Board of Managers and of the Trust Company Board of Directors, in a statement. “We worked cooperatively with the Attorney General’s Office throughout this process. While the Office of Attorney General has reaffirmed that there was no wrongdoing on the part of the Board, it also led to the development of new policies and practices that will serve our mission better.”
In a filing with the state Orphan's Court, the Trust has agreed to provide the Attorney General's office with annual written reports on HTC’s compliance with the terms of the deal.
Kane says the steps will improve the Hershey Trust Company's organizational governance of the school, which has been criticized for years.
“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,” she said.
The investigation became an issue in Democrat Kane's 2012 election battle against Republican David Freed. It posed a potential conflict for Freed because his father-in-law, Leroy Zimmerman, chaired the board during the period the allegations involved.
Freed says he never doubted that Zimmerman, a former attorney general himself, did anything wrong.
Among the reforms outlined by the Attorney General's Office are:
-- 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: a lease of three or more years or 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.
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