With money made from chocolate, Milton Hershey endowed what today is the richest grade school in the world ($7.8 billion)
Who is the biggest shareholder of the $4.8 billion (estimated 2005 sales) Hershey Co., North America’s largest manufacturer of chocolate? A K-12 school in Pennsylvania’s rolling countryside. The Milton Hershey School holds by far the biggest pot of securities of any primary or secondary school on the planet. At $7.8 billion its endowment dwarfs that of the second-richest (the academically elite Phillips Exeter), which has less than a tenth as much. Only six U.S. universities have endowments larger than this school’s.
How childless Milton Hershey came to make MHS sole beneficiary of his fortune is a story that owes as much to syphilis as to cocoa. It is recounted in the new book Hershey: Milton S. Hershey’s Extraordinary Life of Wealth, Empire, and Utopian Dreams (Simon & Schuster, $25). Pulitzer Prize-winning author Michael D’Antonio draws on documents released only recently from the Hershey Co.’s archives, including internal correspondence and interviews conducted in the 1950s with Milton’s friends and colleagues. What emerges: a man swayed one way by his Mennonite mother’s austere religiosity, another by his father’s love for experiment and fantasy.
Willie Wonka he wasn’t. Though Hershey’s is sometimes described as a rags-to-riches story, he was never truly poor. During Milton’s childhood, his unrealistic father drifted from unsuccessful job to unremunerative project and the family subsisted on very little. But Milton’s mother’s family, the Snavelys, were prosperous. Milton’s maternal uncles and aunt bankrolled his first two forays into the candy business, both of which failed.
The third, however, launched in Lancaster, Pa. in 1886, turned out to be the charm, with good luck coming by way of a British importer who placed a huge order for M.S. Hershey’s uniquely creamy caramels. Milton was 28.
At that time neither Hershey nor anyone else in the U.S. was producing milk chocolate. That was a European talent. In 1893 Hershey visited the Chicago World’s Fair, where he saw an exhibit of German chocolate-making equipment. He bought the whole thing and set up shop in his Lancaster factory, producing chocolate bars. In 1898 he sold off his caramel business to a competitor for $1 million ($22 million in today’s dollars) and poured all of his resources into chocolate.
That same year he married 25-year-old Catherine Sweeney. As company lore would have it, Kitty Hershey was an ingenue from Jamestown, N.Y., pure as the driven snow. But D’Antonio documents that Kitty’s snow had been driven farther than previously supposed. She had syphilis, which explains in part why she and child-loving Milton never had offspring. She died in 1915 at 42, leaving 58-year-old Hershey bereft.
His philanthropic impulse and an absence of progeny prompted Hershey in 1909 to start a boarding school for orphan boys and to make the school’s trust the main holder of Hershey stock. Over the years M.S. forged a tight bond with his boys, periodically hosting them at his mansion. “Obviously they were his sons,” writes D’Antonio, “and he was giving them the stability, safety, and community he had missed as he followed his father and mother from place to place.”
In much the same way that Hershey’s combination of capitalism and idealism had led him in 1903 to found the model town of Hershey for his workers, he in 1916 built another perfect town in Cuba, where he had gone into the sugar business. He led another life down there, gallivanting through the island’s many casinos, dropping as much as $50,000 a month.
Come World War II, business prospered even more, thanks to the U.S. government’s decision to include Hershey’s shelf-stable and calorie-rich bars in soldiers’ rations. In 1944 sales reached $80 million. One of Hershey’s closest advisers convinced him that it would make more financial sense for the school trust to diversify its holdings, and Hershey went so far as to agree to a divestiture plan. But he never got around to implementing it before he died in his sleep in 1945 at age 88.
Three years ago the school’s unique power over the Hershey company created a furor. The board of the trust secretly hatched a plan to sell its 78% of the company’s voting shares to Wrigley for $12 billion. But residents of the company town and Hershey’s workers opposed the sale and got politicians behind their movement. The anti-Wrigley mob appealed to the state’s attorney general, who intervened by filing a petition in Orphans’ Court, a legal relic of an earlier time that rules on whether organizations entrusted with the welfare of children are performing properly. An injunction issued by Orphans’ Court was enough to thwart the merger.
Company, town and school now soldier on, with Hershey stock returning an average 17% annually over the last 30 years. (At their recent price of $58, shares have nearly doubled since the summer of 2002 when the sale to Wrigley was attempted.) The Milton Hershey School is expanding, with a goal of housing 2,000 boys and girls by 2013 (MHS went coed in 1977). Bulging with cash, it even bankrolls the ongoing education of its alumni, with postgraduate scholarships of up to $62,500. MHS has produced some accomplished grads, including the late William Dearden, who served as chief executive of Hershey in the 1970s.