July 20, 2011; Source: Philadelphia Inquirer | It’s good to be a corporate candyman, especially if you sit on boards related to the Hershey Trust.
In 2002, Leroy S. Zimmerman joined the board of a small bank that managed the assets of the Hershey charity for disadvantaged youth, at the time paying $35,000 for board service. Zimmerman isn’t just any charitably-minded guy concerned about disadvantaged kids, but a former Pennsylvania attorney general and a power-broker in the state’s Republican Party. Within a couple of years, he was on two more Hershey-related boards and his compensation was a bit higher. For the fiscal year that ended July 31, 2010, Zimmerman had his second consecutive year of pulling down $500,000 in fees for his membership on four Hershey boards, though one of them (specifically overseeing the Hershey School) does not pay a trustee fee. As chairman of the Hershey Trust Co. board, Zimmerman is not only highly compensated, but quite influential.
The decision of the boards to purchase a golf course and renovate and expand the Hershey Hotel has generated controversy about the diversion of resources from nonprofit to less than nonprofit purposes. The current Pennsylvania attorney general is investigating Hershey’s purchase of the money-losing Wren Dale golf Club for $12 million, reportedly two or three times its appraised value, because one of the key golf course investors bailed out by Hershey’s generosity was former Hershey Co. CEO Richard Lenny.
Zimmerman may not be the highest compensated non-employee board member. James Nevels, a former chairman of the Philadelphia School Reform Commission, received $541,519 in the last fiscal year. Zimmerman’s compensation may sink this year since he has given up one of his board memberships that paid $205,000.
To justify its compensation of directors, Hershey paid for a study to compare fees at other companies. The average director fee paid at 27 for-profit companies was $121,500 and the average fee paid at 17 foundations in the study (including the Rockefeller Foundation, the Robert Wood Johnson Foundation, and the Pew Charitable Trusts) was $25,270. The charitable trust decided that the trustees’ “role and time commitment [for Hershey] are more comparable to public companies,” thus the mammoth director compensation levels.
Undoubtedly, despite its charitable trust status, Hershey is a company competing with for-profits that don’t have the burden of maintaining the founders’ commitment to charitable causes. Nonetheless, as a charity or as a system of companies all meant to capitalize and support a charity, the Hershey Trust is categorically different from many of its public corporation competitors. That makes six-figure directors’ compensation packages a cause for some concern—Rick Cohen