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Hershey Trust proves it has some bite

LeRoy Zimmerman, a lawyer based in Harrisburg, Pa., has taken on a new job as a member of the board of Hershey's, the largest U.S. chocolate maker.
/ Source: Financial Times

LeRoy Zimmerman, a lawyer based in Harrisburg, Pa., has taken on a new job as a member of the board of Hershey's, the largest U.S. chocolate maker.

Zimmerman was already a powerful influence at Hershey, based in the eponymous small town just 15 miles outside Harrisburg.

Since 2003 he has served as chairman of the Hershey Trust, which funds the charitable school established a century ago by Milton Hershey, the company's founder.

The trust has about half of its total assets of around $8.5 billion invested in Hershey, controlling some 30 percent of its outstanding shares, and about 80 percent of its voting shares.

The trust's concerns over Hershey's underperformance have already led to the planned departure of Richard Lenny, its chief executive, who is stepping down on Dec. 1.

Sweeping changes on board
This weekend, the trust announced sweeping changes at Hershey's management board, appointing eight new members to the 10-member board.

Zimmerman said in a statement that the trust's board would now "return to allowing this company board and management team to do their jobs and lead the company to new successes".

But the changes significantly strengthen the role of trust members in Hershey's business.

John Coffee, a professor at Columbia Business School, said the changes reflected a struggle at Hershey "between two boards of management: the trust board and the company board. Now the trust has stepped up and shown us which is more powerful."

"There are few U.S. corporations where you have a single controlling shareholder that is as strong and as dominant as the Hershey Trust," he added.

In addition to Zimmerman, two other members of the trust now serve on Hershey's board: James Nevels, founder of Swarthmore Group, and Robert Cavanaugh, formerly the only trust board member to serve on the company board. The new board also has strengthened local political credentials, with the appointment of Kenneth Wolfe, Lenny's predecessor as Hershey's chief executive, as chairman of the board with effect from Jan. 1, and the addition of Tom Ridge, the former Pennsylvania governor who served as President Bush's first secretary of Homeland Security. Five of the 10 members have strong local ties — up from four previously — reflecting the politically charged nature of the debate over Hershey's future.

In 2002 a bid to sell the company to William Wrigley, the U.S. confectioner, collapsed amid concerns over possible job losses.

Pennsylvania subsequently passed legislation that would require the Hershey Trust to consider "the special relationship" and the "economic impact" of any business asset sale "on the community".

As a result, any future strategic moves by the board could require the support not only of the school trust, but also of Pennsylvania's attorney general and its legislators. David West, chief executive and board member designate, said in a statement he was looking forward to working with the new board, "to identify and pursue strategic growth initiatives to build foundations for the company's long-term prosperity."