Corporate Governance in the Hershey Company
THE HERSHEY COMPANY
The scope of this paper is to analyze the kind of agency problems that emerges between The Hershey Company and their stakeholders and shareholders. To answer this, a review of the company`s board structure and ownership structure was made. Thereafter two specific situations that has occurred in recent times was used as case examples to enlighten the agency problems suggested to emerge by the corporate structure.
Ownership Structure
Whinston and Segal defines ownership as a set of rights and obligations concerning assets (Thomsen and Conyon, 2012, p. 122). The ownership structure, naturally, highly affects the actions of the company. Hershey is a publicly listed company on the New York Stock Exchange. There are two key elements of ownership structure regarding publicly listed companies; ownership concentration and ownership identity. Institutional ownership accounts for 75,89 % of the total share, where 660 institutional holders possess 123 672 496 shares (NASDAQ NYSE, 01.05.2014). Out of these, the biggest shareholder is Hershey Trust Company, who holds a total of 12 513 721 shares. Among other large institutional shareholder you find Vanguard Group Inc. (7 429 090 shares), State Street Corp (6 926 329 shares) and Janus Capital Management LLC (5 554 881 shares). However, as the Hershey Trust Company holds class B stocks, they have the majority voting power (80 %). The Milton Trust Company also needs to approve any issuing of Common Stocks or other actions that would deprive the Milton Trust Company of the ability to cast a majority of the votes on any matters where the class B Common Stock is entitled to vote. (Notice of annual meeting of stockholders, 2010). This goes to show that the Hershey Trust Company have the power to swing the votes in the directions of their desires in matters like electing directors, selecting of independent auditors, approval of executive officers compensation etc. even though they only hold 10,12 % of the total
The scope of this paper is to analyze the kind of agency problems that emerges between The Hershey Company and their stakeholders and shareholders. To answer this, a review of the company`s board structure and ownership structure was made. Thereafter two specific situations that has occurred in recent times was used as case examples to enlighten the agency problems suggested to emerge by the corporate structure.
Ownership Structure
Whinston and Segal defines ownership as a set of rights and obligations concerning assets (Thomsen and Conyon, 2012, p. 122). The ownership structure, naturally, highly affects the actions of the company. Hershey is a publicly listed company on the New York Stock Exchange. There are two key elements of ownership structure regarding publicly listed companies; ownership concentration and ownership identity. Institutional ownership accounts for 75,89 % of the total share, where 660 institutional holders possess 123 672 496 shares (NASDAQ NYSE, 01.05.2014). Out of these, the biggest shareholder is Hershey Trust Company, who holds a total of 12 513 721 shares. Among other large institutional shareholder you find Vanguard Group Inc. (7 429 090 shares), State Street Corp (6 926 329 shares) and Janus Capital Management LLC (5 554 881 shares). However, as the Hershey Trust Company holds class B stocks, they have the majority voting power (80 %). The Milton Trust Company also needs to approve any issuing of Common Stocks or other actions that would deprive the Milton Trust Company of the ability to cast a majority of the votes on any matters where the class B Common Stock is entitled to vote. (Notice of annual meeting of stockholders, 2010). This goes to show that the Hershey Trust Company have the power to swing the votes in the directions of their desires in matters like electing directors, selecting of independent auditors, approval of executive officers compensation etc. even though they only hold 10,12 % of the total