Read the case below and answer this question- Which vote (yes/no), if either, could persuade the PA Attorney General to veto the decision? Why?

The Hershey Trust: Managing Conflicts of Interest This case illustrates the real problem of conflicts between board responsibility to shareholders v stakeholders in the corporate setting. Specifically, the case highlights potential conflicts that can arise when shareholders are not the companys sole stakeholders and how this fact can complicate corporate decision making. It becomes even more complex when the lines defining ownership are blurred and the concentrations of power within the various entities impact the decision-making process. The goal is to understand how a board manages conflicts of interest.

The Hershey Trust: Managing Conflicts of Interest in Corporate Governance As Layla Dylani settled into her seat for the flight home, the complexity of her position was top of mind. Being one of 11 members1 of the board of directors for the Hershey Company, she had just received a presentation from snack food company Mondelez regarding a takeover bid. Under a traditional governance structure, her primary concerns would be ensuring that the business case for the acquisition made sense and the shareholders she represented would achieve a worthwhile return on the deal. She certainly had to do this as a member of the board, but her responsibilities did not end there. Dylan was also a member of the board of the Hershey Trust Company, a trust that oversaw the funding of the Milton Hershey School and that had a responsibility to provide for the school in perpetuity.2 A large portion of the trusts funding was represented by its stake in the Hershey Company,3 making her deliberation on Mondelezs offer even more complicated and multifaceted. Under normal circumstances, this shared relationship worked in concert if the company was doing well, then the trusts funds were doing well. So, making the best decision for the Hershey Company matched the best decision for the Hershey Trust Company. However, in this instance, Dylan had to judge the impact of liquidating the billions of dollars in shares that the trust held and what it could mean for the schools long-term future. Beyond money, both institutions had a rich history of community investment and values-based outreach, indicating that they were motivated by several factors beyond pure monetary valuations.On the surface, Dylan knew that the strategy behind the deal made sense. Despite only being spun off from Kraft Foods in 2012,6 Mondelez had proven itself as a highly successful company. Based in Illinois, it owned many of the worlds most famous snack food brands including Oreo, Chips Ahoy, Cadbury, Ritz, and Triscuits.7 Behind the strength of these brands and a growing snack market Mondelez held a leadership position in nearly every category in which it competed, driving revenues to nearly $30 billion.8 If there was any weakness in its portfolio, it was that the company made the majority of its money outside of the United States a fact which made an acquisition of the extremely U.S.-centric Hersheys a very attractive proposition.9 Similarly, Hershey could benefit from the international exposure of Mondelez, because 85% of its business was conducted in North America.10 Yet, Dylan was not completely convinced that this was the best long-term move for the company, the trust, and the community that was built around them.As she listened to the flight attendants pre-flight presentation, she wondered: was it possible to make a decision that reflected the mission, values, and goals of both the company and the trust? If not, to which position did she owe loyalty? How would the local community react to this deal, especially considering both the trust and company had been pillars in Hershey, Pennsylvania for more than 100 years? What metrics were key to making her decision and how would her vote impact the relationship between these interconnected organizations? The planes acceleration stirred Dylan from her reflective thoughts. She had one week to formulate her decision, and she truly wondered if she could make the right decision. Historical Questions: To Sell or Not to Sell? Fourteen years before Mondelezs 2016 offer, the Hershey Trust had faced similar circumstances. By the mid-1990s, the Hershey Trust had become embroiled in conflict surrounding the management of its enormous funds. The complaints had primarily come from the Hershey School alumni association, but eventually drew in the Pennsylvania attorney generals office and local courts. An employee of the trust had stated that the board feared that what had happened to the Beryl Buck Trust would happen to the Hershey Trust.45 The Buck Trust, designed to alleviate poverty in a wealthy California county, had exploded with wealth well beyond the scope of its mission, leading to a court intervention that subsequently dictated the way the trust spent its money.46 Acting preemptively, the Hershey Trust Company went to the Dauphin County Orphans Court to request a diversion of funds to an education think tank. The Orphans Court denied the request, citing a violation of donor intent, and the proposal seemingly increased the attorney generals offices scrutiny of the trusts management. In late 2001, the 17 members of the trusts board met with a deputy attorney general who was investigating their potential mismanagement of funds, who advised them to diversify the trusts assets by selling its share of the Hershey Company.47 The Wrigley Offer Taking the advice of the Pennsylvania attorney generals office into account, the Hershey Trusts board of directors voted 15-2 to consider selling their share of the Hershey Company. The board informed Hershey Co. president Richard Lenny of its intentions and asked him and the company to begin soliciting bids. Lenny argued forcefully against the sale, claiming that the company was much more valuable on its own, and even offered to buy the shares back over time at a small premium. The trust rejected the offer and threatened to replace Lenny if he continued to oppose the sale.Just before the September 2002 deadline, Hershey announced it had received two offers: a $12.5 billion cash-and-stock offer from the Wm. Wrigley Company, as well as a $10.5 billion joint offer between Nestle SA and Cadbury-Schweppes PLC.49 The Wrigley offer included a price of $89 per share, a 42% premium over Hersheys share price at the time.50 Additionally, Wrigley offered to change the name of the company to Wrigley-Hershey and keep all of the Hershey facilities open. Although the offers were viewed as attractive by many observers, the Hershey Trust announced the next day that the board had voted 10-7 to reject both offers. Reasons for Rejection The news of the possible sale was met with an extreme backlash from Hershey, PA community members fearing job loss, fewer taxes, and reduced tourism. Despite Wrigleys assurance that no jobs would be cut or moved as a result of the merger, the opposition continued. Beyond the economic value of the company to the town, many town residents felt a strong emotional connection to the company as well. The most ardent supporters were known as Hershey-ites, and they led the protests and petitions against the sale.51 Although the official reason given for the rejection was that both deals failed to meet the trusts objectives, it was widely speculated that the trust bowed to these pressures from the community. Many board members felt personally villainized; one claimed his wife had been receiving nasty looks at the supermarket and some were reportedly near tears in the meeting.52 One observer commented that the trust would not have voted to sell even if God had walked in and offered $110 a share.The deal had also received significant opposition from attorney general Mike Fisher, who was mounting a campaign for the governorship at the time. Fishers request for an injunction to block the sale was granted by the Orphans Court after he argued that a sale would devastate the town and its workers.54 Although this was viewed by many as an unprecedented use of the attorney generals power, Pennsylvania law required that charitable trusts consider the special value of their assets to the local community.55 The Mondelez Vote Mere hours had passed since the meeting with Toni DuBois,ii Mondelezs Chief Executive Officer, but Dylan had just returned to her Chicago office and was exhausted. She sighed, pushed away from her desk, and gently rolled her chair, still sitting, over to the 15th floor window. She spotted a line of children streaming from a large brick building and, imagining it was the Hershey School, marveled at how this was really at the nexus of everything, a $12 billion promise. But to whom? It didnt quite feel real. Right now, the young people in another brick building in Hershey, Pennsylvania seemed like they were part of another universe, and no concern of hers at all.As if the internal politics surrounding this decision were not hard enough to navigate, the Pennsylvania attorney generals office had just reopened an old investigation regarding potential conflicts of interest within the trust with fairly immediate consequences. Concerned that some of the terms of the agreement reached in 2013 between the attorney generals office and the trust were being violated, the office announced that it was seeking the resignation of board members who had served over ten years and next year was Dylans 10 year anniversary on both boards.The 2013 agreement, which concluded the former investigation, explicitly required board members to disclose all actual or potential conflicts of interest to either the School or the Trust Company, and the attorney general did not feel that the board had honored this commitment.57 Dylan felt conflicted. She had witnessed, over a decade of service, how much good came out of the trust, and how many beneficiaries it served, but it was clear that there were still major internal problems at the company. The question was whether they were simply the result of individuals poor decision making, or, instead, due to a deeper structural problem in the governance of the organization. Mentally staring down the likely end of her tenure as a board member, she began to consider the unique circumstances of her own appointment, back in 2007. Despite the careful language used internally to discuss the penultimate CEOs departure not that it was discussed often, if ever the fact of the matter was that he had been ousted by a trust board that was intolerant of his independent streak.58 When the next CEO succeeded him, in 2007, that same trust board asked six of the Companys board members to resign, and another two followed suit. In a show of strength to the new CEO, the trust installed eight hand-picked directors to the Hershey Companys board, Dylan among them.The shrill ring of her desk phone broke her reverie. She had not been looking forward to this call, but she steeled herself and picked up. An hour later, Dylans mind was racing. The call had been from Antoine Miller,iii the CEO of the Hershey Company. He had called to debrief the Mondelez offer with her, and she could tell that he was excited but was hiding it well. On paper, the deal made some sense, he said. But despite Mondelezs reasonable bid of $23 billion, he knew the board of the Hershey Trust would be reluctant to consider a sale at any price. Maintaining autonomy was a high priority for the trust, because it allowed them to make corporate decisions in the interest of the Hershey School. But Mondelez was under pressure to make a major acquisition, having been the recent target of a prospective acquisition itself, and Miller expected them to push hard on this offer.Beyond the immediate concern of the offer, however, and focusing more on the long-term strategy of the deal, Miller noted how it could solve a major pain point for Hershey Co. diversifying away from candy, the sales of which were lagging in the North American market, and leveraging the Mondelezs success in international markets. Both internal and external analyses of the merger were estimating that the synergies of the deal could result in sales increases of over 10%, given that the companies were perceived as somewhat complementary.61 Finally, Mondelez had offered to keep the Hershey name and move its headquarters to from Deerfield, IL to Hershey, PA; a small offer, but not meaningless given the nature of the Trust as a centerpiece and major investor in the community. This could be good, he said, and asked her to keep an open mind, especially in discussing the deal with other board members. Dylan was already imagining what the board members would say. There was a strong sense in the community that the company should stay independent, out of a perceived obligation it has to the 14,000 members of the sweetest place on earth. It was the legal obligation of the trust to protect those interests, which made Dylans role as a member of both boards that much more difficult. Conclusion:Dylan hung up the phone feeling more conflicted than before. Despite her old reservations about Antoine Miller, which were due to the original nature of her board directorship as a counterbalance to his authority as CEO, he had proven to be a capable and careful leader. Under his guidance, the company had doubled its market value to $20 billion, widened its profit margins, and increased its market share in the. U.S. by 3%.62 There was no doubt that he wanted the best for the company. The question was how the board of the trust would weigh the strategic monetary interests of Hershey Co. and, by extension, of the majority-shareholding trust against the trust boards conception of what it meant to serve the Hershey, PA community and the Hershey School. How would the trust board members perceive this potential change in the trusts authority, given their historical resentment of outside influences? Would this offer incite the attorney general to weigh in again on this deal, as the former attorney general had? And where did Dylans responsibilities lie? As a member of both boards, like two of her colleagues, she had duties to each were they conflicting, or could this deal actually create more wealth for the school and the town? With only a few hours remaining before the final board convened, Dylan was increasingly unsure of how she would vote.