The Orphans Who Still Own the Hershey Chocolate Company

Milton Snavely Hershey was born in 1857 in central Pennsylvania to Mennonite farmers. He left school in fourth grade. By the age of nineteen, he had failed in two different candy businesses — the first in Philadelphia, the second in New York. He returned to Pennsylvania broke and unwilling to ask his family for help. His third attempt — the Lancaster Caramel Company, founded in 1886 — finally worked. By 1900, Hershey had sold the caramel company to a competitor for one million dollars, an extraordinary sum for the period, and turned his attention to a product that almost no American producer was making at scale: milk chocolate.

He built a town to make it in. He filled the town with his own workers. He built schools, parks, a department store, a trolley system, a stadium, and a zoo, all owned by the company. He paid wages well above the going rate. And in 1909, when it became clear that he and his wife Catherine were unlikely to have children, they signed a trust deed that would, a century later, still control the company that bears his name.

The trust deed established the Hershey Industrial School — a residential school for orphan boys, headquartered in Hershey, Pennsylvania. Milton and Catherine put almost their entire personal fortune, including their controlling block of Hershey Company stock, into the trust. They told no one for about ten years. The terms became publicly known only after Catherine's death in 1915, when Milton, in deep grief, gave an interview revealing what they had done.

What the trust actually controls

The Milton Hershey School Trust — the entity Milton and Catherine created in 1909 — today holds approximately eighty percent of the voting shares of The Hershey Company. The trust's purpose, set out in the original 1909 deed and unchanged since, is to fund the operation of the school for the benefit of children who have lost one or both parents, or who are otherwise socially or financially disadvantaged.

The school itself, which now educates approximately two thousand students annually from kindergarten through twelfth grade, is fully funded by the trust. Tuition, room, board, healthcare, clothing, and college transition support are all provided at no cost to the students or their families. The total annual operating cost runs to approximately three hundred million dollars. The trust's endowment is approximately seventeen billion dollars. The dividends from the Hershey Company stock, plus the trust's other investment returns, fund the entire operation.

In other words: every Hershey bar sold anywhere in the world generates, indirectly, income for an orphans' school in central Pennsylvania. This has been continuously true for over a century.

The Hershey Trust War of 2002

The arrangement is unusual enough that it has been challenged, in different forms, multiple times. The most consequential challenge came in 2002, in what Pennsylvania newspapers came to call the Hershey Trust War.

The trust's board of directors, advised by professional money managers, became concerned in the early 2000s about a basic problem: the trust's seventeen-billion-dollar endowment was concentrated almost entirely in a single asset, the Hershey Company. By any standard of modern fiduciary management, that level of concentration in one stock was reckless. If Hershey ever stumbled, the trust — and therefore the school — would be in serious trouble.

The board concluded the responsible action was to sell. They quietly initiated a process to find a buyer for the trust's controlling stake. Wrigley, Cadbury, and Nestlé all expressed interest. The leading bid, from Wrigley, was approximately twelve billion dollars.

When word leaked, the town of Hershey revolted. The town existed because of the company. The school existed because of the trust. The trust's relationship with the town and the school was the entire moral architecture of what Milton and Catherine had built. Selling Hershey to Wrigley — even to diversify the trust's holdings — would have severed all of that. Wrigley would presumably move some operations, lay off some employees, and become a normal company optimising for shareholder return rather than the unique web of obligations that came with the Hershey name.

The state of Pennsylvania intervened. Attorney General Mike Fisher, exercising the state's authority over charitable trusts, went to court to block the sale. After several weeks of public protest, including thousands of Hershey employees marching through the town, the trust's board reversed course and cancelled the auction. Several board members resigned. The Pennsylvania legislature subsequently passed Act 24 of 2002, which gave the state attorney general formal veto power over the sale of any controlling interest in a Pennsylvania charitable trust's primary asset.

The Hershey Company remained owned, eighty percent and counting, by the school its founder had built ninety-three years earlier.

What the structure actually does

Most American corporations are owned by some combination of mutual funds, pension funds, and individual investors, none of whom have any particular long-term obligation to the company beyond their investment horizon. This produces a familiar set of pressures: quarterly earnings management, share buybacks at the expense of long-term investment, hostile takeovers, executive compensation that incentivises short-term stock-price movement.

The Hershey Trust insulates Hershey from most of these. Because the trust's purpose is to fund a school in perpetuity, the trust has no exit. It cannot be acquired. It cannot be subjected to a hostile tender offer because the supermajority of voting shares is, structurally, unsellable. The trust can — and does — vote on directors, on major strategic decisions, and on executive compensation. But it does so on a horizon that is closer to a century than a quarter.

The empirical effect on Hershey as an operating company has been complicated. The company has been more conservative than its peers — slower to acquire, slower to expand internationally, more willing to invest in long-term operational improvements that would not pay back inside the typical three-to-five-year executive compensation horizon. It has also paid more reliably and more consistently across decades than most public companies. Hershey shareholders who have held the stock since the 1950s have done better than a comparable index investor, with substantially less volatility.

Why this matters now

The Hershey Trust is the most prominent surviving example of a corporate-ownership structure that was once more common in American business: a private trust, established by a founder with a specific long-term mission, holding controlling ownership of a public company in service of that mission. The Bosch family in Germany, the Wallenbergs in Sweden, and the Tata family in India have built variations on this model. In the United States, almost all of the comparable structures have been dismantled over the last fifty years, either by sale, by court order, or by the slow erosion of the founder's intent across generations.

The Hershey Trust survived because Milton and Catherine wrote the deed unusually carefully, because the state of Pennsylvania chose to enforce it when challenged, and because the cultural memory of what Milton and Catherine had built remained strong enough, a century later, to mobilise a town to defend it.

It is one of the very few cases where a founder, by the exact legal structure they chose at the moment of their company's transition out of private hands, was able to dictate the terms of how the company would be governed for the next hundred years and counting. Most founders, even ones who care deeply about long-term mission, never set up the structures that would let their intent survive their own lifetime. Milton and Catherine Hershey did. The orphans of central Pennsylvania still benefit from the choice they made in 1909, and will, under the deed they signed, continue to benefit indefinitely.