The Hawaiian gazette. [volume] (Honolulu [Oahu, Hawaii]) 1865-1918, 1916-11-24
Commission Spends FruitIess At
terhoon Seeking Knowledge
i Of company's Workings
J. MCLEAN TAKES STAND
kit6 BECOMES QUERY TARGET
Defends Methods Employed BY
the Biz Island Steamship Cor 4
poration Now Under Fire

To the nonotonous drone of an inees.
SAINT series Of questions from Charles r.
Forbes, chairman, the public utilities
commission yesterday spent another
fruitless hearing yainly ehdeavoripg to
determine definitely Just what Is con-
tained in the report on the accounts
and finances of the Inter-Island Steam
Navigation Company, compiled by H..
Gooding Field, commission special au.
ditor. -f.....-... @.-. .t.+t -
with the lull in the verbal battle oc-
casioned by the routine examination of
Auditor Field by Chairman Forbes, the
dove Of peace took o perch in the board
room yesterday to watch commissioners,
corhpany officials, Field and the gen
efal public founder through the tor.
tuous tangle Of figures and accounts.
~ L. Mclean, Iee-president of the
company, for a brief spell, was the tar.
get of the commissions questioning.
Mclean Calls Habit Sound
That the company has been in the
habit of 'paying both cash and stock
dividends ont Of its insurance fund
was stated by Mclean, a. point which
.Field has maintained and criticized
however, vigorously defended the prac-
tise as sound finance.
OF this method of finance Field says
in his report: an the large part of or
the whole account in the reserves or
safety funds are utilized for the pay.
nient of stock dividends, rs has been
the case, then continual building up Of
such reserve defeats its own purpose.
There can be only one construction to
place on such financing and that is that
the operating expenses have been bur
dSned with excessive costs"
In defending the practise Mclean
said: "If, instead of carrying our
own insurance, we insured with an in.
sttance company and paid to that com
pany in premiums the amounts we have
credited to our own insurance fund,
that company would have earned the
entire amount of our, insurance fund
in premiums and would have paid 1t
out individends to its stockholders 36J
stead of to the stockholders of the In.
tef.Island.
Can Assume Any Loss
1--WE have sufficient nssets to as
sumo any loss to our vessels. II our
stockholders choose to assume the
risk they should have the right to par
tieipate In the profits of that insur-
anee.
|"If the Inter. Island aceumulates in
the insurance fund more than is neces-
sary to take care of the risk on the
steamers it is up to the directors Of the
company and it is their right to dis
pose Of the extra accumulations in this
Fund for the benefit of the stockhold.
ers.n
Another point that stood clearly out
Of the maze of technicalities was
Field 3 criticism of the company's clas-
sificatiOn Of accounts. His reports
shows that one of four accounts into
which the compGny's expenses are kept
in a Sundries Account and Of several
subdivisions of this account is one
headed Sundry Expenses. Into this ac
count, declared Field, Sundries Account
Sunday Expenses, during the three
and half years ending June 80, 1916,
was charged $6s3 :038.ll.
Would Segregate Account
Field recommends that the account be
segregated into several accounts. Most
of the charges to it, he declared yester-
day, are arbitrary charges and should
be classified under their separate heads
McLean's defense was that extension
Of the segregation could 60 on endless
ly and only cluttered up the books.
Field again pointed out that the com
pany should have actual sums set aside
in cash or negotiable instruments to
represent the various reserve or safety
funds such as depreciation or insurance.
Mclean answered with his explanation
that the sum in surplus at all times
represented these reserves.
Field then presented figures to show
that on June 80, 1909, the company 3
cash surplus was wiped out entirely
when the balance in surplus, $l48,.
S06.85, was appropriated for part of a
stock dividend. At the same time the
balance on the books in the insurance
fund was $l40,58l.45. In addition
Field declared on December 81, 1915,
the company had but 5000, 900 Of liquid
assets, not sufficient to cover the
amounts in the books as balance in the
reserve funds. Field said:
Fields Objections -. ,.z
."My objection to leaving funds for
reserves in surplus is that they might
for other purposes such as stock divid.
ends as In the case of the 1909 stock
dividend. The company would then
have to go out and borrow in case Of
sudden catastrophe or other emer'
gency."
Asked what he would have done in
1909, when cash surplus was wiped out
and sudden call was made on the in
suranee fund, Mclean replied that
probably the company would have Dor,
rowed the money for the emergency.
He maintains, however, that this is not
necessary, as the other assets of the
company cover the safety fund bal,
ancos and protect them as well as an
actual "earmarked reserve would.
A great deal of time was spent yes,
terday in hearing Auditor Field re-
read pages of bis report that are
already in the record as having been