0BU(ACCOUNTING AND FINANCE)
Leah Mpondela 609-6340-02
Fadzai Gambiza 609-6406-02
Takundwa Muzenda 609-6452-02
Mariam Nantumbwe 210052-01091-010
I. It is very evident that one of the main responsibilities that the Hershey Trust Board views their responsibility to be is to the Milton Hershey School. In 1918, Milton Hershey endowed the trust board. The objective of this endowment was to have full support for the Milton Hershey School. Further 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. It addition, it was the boards obligation to keep up with the Hershey legacy by insuring that the decisions that had been made were in line with the legacy views. Keeping Hershey’s legacy of community involvement was a key obligation to the 17 members of the trust bored. Milton Hershey picked Pennsylvania out of many other locations because he wanted to develop a community, one which he grew up in.
II. For other community members, they view the responsibility of the trust board to themselves. Hershey Pennsylvania had a population of about 22,400 of which 6,200 where employees of Hershey itself. The population were concerned that Hershey legacy of community involvement would be compromised in the sense that they will not be taken care of anymore and thus they will not have job security anymore and will lose their jobs. The community leaders went further and organized rallies that to echo their concerns and in addition to that, developed a website ‘www.friendsofhershey.org’ putting together an amazing number of 6500 signatures that opposed the potential sale of Hershey Foods. The community strongly believed that the responsibility of the trust board was to them as they did not just end on the website but caused further chaos by having public protests that included company employees and retirees and Milton Hershey School. These protests lead to attention of the attorney general.
III. As members of the Hershey board, our fiduciary responsibility would be to school. The objective of the board is to safe guard the community and the school. Ethically also, it will be morally right for us to ensure all the children that are attending the Hershey school a good education as they school is a key determinant of their future. As members of the board we would also have to safe guard the interest of the Hershey family. It’s a family legacy and we have to ensure that their interests are being met above everybody else.
(Fadzai Charity Gambiza)
Based on own evaluation of Hershey Foods Corporation in my own opinion I feel that it was fairly valued to a greater extent before they announced that it was for sale by the stock market. Taking into consideration all the Stock-price performance graphs and charts, stock price responses to trust boards publications graph and the estimated weighted cost of capital for Hershey and industry comparable tables in the case study provided it clearly shows that the company was properly evaluated before the announcement. According to exhibit 11 for the industry comparable Hershey Foods Corporation (listed on the NYSE) has the lowest number of common shares outstanding with the highest stock price as compared to Cadbury Schweppes PLC-ADS (NYSE), Nestle S A-Spon ADR (OTC) and Wrigley (Wm) Jr Co (NYSE). Furthermore, if HFC intended to sell its stock with the value of its stock to maybe raise more capital and do more...