Suggested Questions for Hershey Food Corporation

1. How do you think the members of the Hershey Trust Company board view their
responsibility? How do other community members view the responsibility of the
trust board?

The Hershey trust company viewed their responsibility to be with the Milton Hershey
School. In 1918, Milton Hershey endowed the trust board. The objective of this
endowment was to have the full support for the Milton Hershey school. The trust felt
that the lack of diversification and investment into one in industry is too risky. The
communities view came from a more stakeholder value and everyone involved in the
community.

In March 2002, the Trust Board decided to make a decision that was more in the
schools favor, which was making sure that its holdings were less concentrated in
Hershey stock. Moreover, the composition of the board moved more toward education
professionals in that same year with their mandate remaining to serve the interest of
Hershey school. There was also an increased concern with the board members that too
much responsibility was being put on the shares on Hershey Food Corporation
meaning less attention was being focused to the school.

2. Assume that you are a member of the Hershey Trust board. To whom (or what)
do you owe your fiduciary responsibility? How does the legacy of Milton S.
Hershey affect your thinking as a member of the board?

I owe my responsibility to the community. I have to act on the premise that benefits
the public because that it what would honor Milton hersheys legacy the best.

Out of the 22,400 population, 6200 were Hershey employees and they were concerned
in the sense that they are afraid that they will not have any job security anymore and
will lose their jobs. The objective of the board is to safe guard the community and the
school, it is also important to ensure all the children that are attending the Hershey
school will have a good education as it is the key determinant of their future. As
members of the board we also have to safe guard the interest of the hershey family. It
is a family legeacy and we have to ensure that their interest are being met above
everybody else.
3. Is Hershey, Pennsylvania truly a unique place? Can you think of other
communities threatened by economic growth and other changes? Should we
protect the town of Hershey in the same way we protect the rain forest or
endangered species?

I believe Hershey, Pennsylvania is truly a unique place. The towns population in 2002
was 22,400 people. In this total, 6,200 were Hershey employees. That means that
27.68% of employement in the town comes from the Hershey Co.

Quoted by the business world magazine Hershey Pennsylvania is a “A model town, A

modern factory, a substantial business, these are realizations of one businessman’s
dreams”. In 1901, Milton Hershey saw that his company had grown out of his
expectations thus needed a new location as it was too small. He considered the
countryside would be the best alternative. Hershey pennysylvania is considered to be a
distinct place due to the fact that out of many towns that had been considered yo be a
home to a new factory, it was one that was chose despite the odds against it. It is
considered to be unique due to the fact that the whole town was named after an industry
called Hershey and the whole town revolves around it. It controls the way in which
people leave their lives as most people are employees of the industry and their
children are students at Hershey school. Only a few other town that have unique
names are in existence.

Whilst it is clear that the Southeast Asian region attracts both foreign and private
investments in the agriculture sector, the drawbacks of this success are greatly felt by
farmers in that region. In Manila, Philippines, farmers have been experiencing a lot of
forced eviction as they are displaced at the wills of others and not of their own. In
addition to that, the farmers in that community experience land grabs as well as labor
practices that are far from fair. The most devastating thing about the issue that is in
the Philippines is that the private investors have given their backs to the farmers other
than lending them a helping hand (Reyes, 2012).

The latest case of self-immolation that resulted due to economic growth and forced
eviction was in Hunan Province in mid October 2012. According to Lopez and
Galinatio; 2004, the community in the Amazon rainforest Brazil has also been
threatened by economic growth. In Brazil, the government introduced policies that
where made to open Amazonia for the purpose of human settlement and to encourage
 agro-industrialization. Unfortunately these played a key role in the increased
deforestation and displacement of the indigenous people of that region as the place
that they new as home was being destroyed.

Hershey all wants to work with rainforest alliance in order to collaborate with the
Rainforest Alliance to offer cocoa farmers training that will highlight to them the
impact of climate changes globally and how to eliminate child labor and thus increase
literacy (Hershey expands responsible cocoa community programs in westafrica,2012).
Why shouldn’t we protect the town of Hershey? There is absolutely no reason not to as
it has been the source and the beginning to positive changes all over the world. Hershey
does not only safe guard the population that it has but the millions of people across
boundaries experience that benefits that have come about due to the existence of this
town. In addition, the rainforest should also be protected in the same way. Rainforests
provide us with the renewable natural resources essential to our living and breathing.

Food, shelter and medicines are sourced from our ever under valued rainforests. Seeing
that both the rainforest and Hershey add significant value to human life, the both must
be protected equally

4. Is diversification a valid reason to sell HFC? How would such diversification have
served the Hershey School 10 years ago, for example?
Diversification of an investment portfolio alone is not a valid reason to sell Hershey
Foods Corporation. Ten years ago, there would have been a few benefits for the
Hershey School with the sale of Hershey Foods corp. stock. These benefits include a
price advantage on the sale of the stock and a short-term monetary gain for the
endowment fund.
5. How would you describe the changes in the trust’s board structure over the past 10
years? (See case Exhibits 5 and 6.) Why do you think the changes occurred? How
would you have expected the 1990 board to react to the attorney general’s
recommendation to diversify the assets of the trust?
Hershey had mainly put its focus on the school than the business its self. Whereby the
business was at greater risk and was in need of the full attention the trust’s board.
However, the board had a different approach most of the board members even
attended school at Milton Hershey School. The suggestive information that has been
provided to us at first after analyzing the professions those in the trust’s board in 2001
to 2003 as indicated by Hershey annual reports . (2001). The capacity of their
knowledge might have caused the impact to the change. For example just to highlight
on a few like Joan S. Lipsitz Ph.D whose an independent education consultant and
Anthony J Colistra superintendent.
However much attention will be on the case study exhibit 5 and 6 will start by looking
at the net sales, which are defined as the actual sales that have been generated by
Hershey. Furthermore it gives an accurate picture or on how much money which will
 be expected to be received by the company. Evidence has been provided from 2002 to
2012 they has been a variation in the figures 2002, 2003, 2004 it can be said to be
constant and for 2005 to 2012 that’s when rapid change occurred marking an increase
which had an impact on the net operating as highlighted by Hershey annual reports.
(2002). Hershey is a well-established company it will anticipate on higher earnings.

6. If the bids are economically attractive, would you vote to accept either one of them?
Why or why not?

Since several share holders filed suits seeking assurance that the trust will receive
maximum value for its controlling shares and Looking at the stock price reaction to
the trust boards announcements I would vote to go ahead and sell the stake of Hershey
trust in Hershey foods and therefore put the corporation up for sale to either Wrigley
or Nestle SA and assuming majority of the board takes my side of the vote, the
financial markets will react as described below; Following the news of the
announcement of the sale Hershey foods investor speculation lead to an increase in
the Hershey foods share price by more than 20% as according to the case study the
stock price soared to $79 per share from $63 per share this shows that the financial
markets viewed the acquisition of Hershey as a good thing and reacted positively
therefore more of Hershey shares will be demanded for which will in turn increase the
share price of Hershey stock. Since Wrigley is offering $89 per share and a premium
of 42% over the pre announced stock price and on the other hand Nestle S. A offered
$75 per share and a 20% premium, even though it was lower than that offered by
Wrigley it’s still higher than the preannounced stock price of $63 per share. This
therefore indicates that the financial markets will respond positively to the sale of
Hershey Foods Corporation in a way that demands for the stock will increase which
will in turn increase the price of the Hershey stock. The implications of my decision
for the sale of the trusts entire stake in Hershey Foods Corporation in the short term
are as follows; The stock price of Hershey stock will increase from the pre announced
stock price of $63 per share to The proposed sell of Hershey Trust’s entire stake in
Hershey Foods would meant that the whole corporation was up for sale, therefore
Hershey Foods Corporation will no longer exist as an independent entity since it will
be sold and owned by another company.