Lessons Nonprofits Can Learn From the Hershey’s Controversy

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I’ve kept up with the Hershey’s controversy on and off for a little while now. For those not familiar, the Boards of Hershey’s Trust and School (yes, the chocolate) were being accused of all kinds of indiscretions and abuses.

I was happy to see the ordeal recently brought to a close, with the Boards cleared of many accusations. There was, however, a little cleaning up that needed to be done. Consequently, Hershey’s was required to enter into an agreement with the State Attorney General (AG), requiring a few governance practices be beefed up or put in place.

Good Reminders


As I was reading through the agreement there were a few requirements I thought would serve as good reminders for other organizations (i.e. things you probably haven’t thought about in a while but should have in the back of your mind). Especially those organizations with subsidiaries and affiliates.

  • A Conflict of Interest Policy is always a good idea. 
    • Board Members should disclose conflicts when joining the Board AS WELL AS on an annual basis. So much can change throughout the years, especially where the Board has long terms.
    • I thought it interesting how expanded the definition of “family” was in the policy. Granted, the organization is a legacy one so this is likely a product of that. But,  I think it’s important for organizations to remember to customize even the most common policies to reflect legal requirements and reality.
  • A Travel and Expense Reimbursement Policy is also a good idea.
    • I’ve yet to come across an organization that doesn’t reimburse its Board Members for some type of expense. It’s been even rarer that I’ve come across an organization that has a process for this. Board Members should have a clear understanding of what can be reimbursed, when and how. Also gives the organization an easy out if they think a specific reimbursement request is inappropriate or too much.
  • Be thinking about manager and director qualifications.
    • When recruiting managers and directors  the reality of the organization (whether it works with kids, in education, with the at-risk) should be kept in mind.
    • Everyone talks about a diverse and professional board, but very few capitalize. Take advantage of the skill-sets and expertise on your Board. Delegate roles/responsibilities where appropriate (i.e. don’t have a finance guru handing out hot dogs as opposed to sitting on the finance committee). Along the same lines, organization should utilize committee structures and any partnerships created through ex officio positions to tackle issues too.
  • Avoid overlapping the managers and directors of related organizations. 
    • This generally comes into pay when an organization has subsidiaries. Many have gotten popped where the Board of the nonprofit subsidiary mirrors the for-profit/non-profit subsidiary Board. One reason being how much easier it is for conflicts to arise, and fiduciary duties breached, when Board Members sit on such closely related Boards.
  • Set compensation based on comparables.
    • There are several specific requirements Hershey’s has to follow when determining compensation (ex. certain types of reports and audit firms have to be used and submitted for review). Most organizations don’t have to be quite as specific, but keep in mind objectivity is the key. Surveying 3 Executive Directors in your bridge club just isn’t gonna cut it. Reputable reports should be used, and particular attention paid to your geographic location as well as your industry.

 

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