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QUEST MEANS BUSINESS
UK Treasury: Brexit Could Cost 820,00 Jobs; Far-Right Candidate Narrowly Defeated in Austria; Manchester United Sacked Louis van Gaal; FIFA Fires Deputy Secretary General; Bayer Offers to Buy Monsanto for $62 Billion; U.S. Markets Finish Flat; Stocks in Europe Close Mostly Lower; Battle For Control of Viacom; Obama Lifts Vietnam Weapons Embargo; San Francisco Fed: 50 percent Chance of Rate Hike;Seidman: CEOs Cannot Avoid Controversy; AXA to Quit Tobacco Investments. Aired 4-5p ET
Aired May 23, 2016 - 16:00:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[16:00:00] RICHARD QUEST, CNN ANCHOR: Start of a new week. The markets, bell is ringing. Don't be fooled by the Swiss Alps look of the trading
day. Relatively small moves. Down just over 7 points of the DOW as the bell rings. Good grief. That can only be described as a wimpy gavel to
end trading on Monday. It is the 23rd of May.
Today, a ready-made recession. David Cameron warns of Brexit could bring economic calamity to the U.K. From tiny seeds to mighty mergers grow.
Chief Executive, Bayer, defends his Monsanto takeover. And a weekend is a long time in football. Manchester United just sacked their manager. We'll
tell you why and look at who they'll bring in next. I'm Richard Quest. With an hour together, I mean business.
Good evening. The British Prime Minister is calling it a ready-made recession. With a month to go before the EU referendum, the government has
issued a warning to voters. Say good-bye to the European Union and you'll be waving farewell to economic growth along with it. There's been a new
analysis. It comes from the U.K. treasury and foretells of disaster for the U.K. if it no longer has access to the EU as its main trading partner.
David Cameron says a vote to leave means knowingly voting for a recession.
(BEGIN VIDEO CLIP)
DAVID CAMERON, BRITISH PRIME MINISTER: The shock to our economy after leaving Europe would tip the country into recession. This could be for the
first time in history a recession brought on ourselves. As I stand here, it would B&Q, it would be in DIY recession.
(END VIDEO CLIP)
QUEST: By DIY, the prime minister is referring to the phrase do it yourself. B&Q is a home improvement mega store in Britain. So, what is
the U.K. treasury saying that would make it a DIY recession? The treasury's worst-case scenario is a severe shock. Shows that if the U.K.
votes to leave, well, I have the pieces because we're going to do or very own DIY Brexit box. So here we go. Get the saws and the drills. And off
There would be a one-year recession so says the U.K. treasury. And that one-year recession will see GDP tumble by some 6 percent over the course of
the first year. But it is DIY and I'm not very good at it. Now you'll also get a case of home prices. They will fall some 18 percent during the
course of that recession or the first year.
The big issue is jobs. Not only that, but the question of whether 820,000 jobs will be lost during the two years. So now you're starting to see the
Brexit ballot box, 820,000 jobs, home prices to fall, say the treasury. A one-year recession is their prognosis with GDP potentially down 6 percent.
Put it altogether and you do have the Brexit vote box with the ballot paper that the British people will be asked, vote only once, should the U.K.
remain or leave? Remain or leave the European Union? So here we have our ballot DIY box as the basis of the treasury. The leave campaign hit back
saying that these doomsday economic predictions have a habit of being wrong. The former London Mayor, Boris Johnson, has called the analysis
(BEGIN VIDEO CLIP)
BORIS JOHNSON, FORMER LONDON MAYOR: I think again they're rattled on the remain side of the campaign, because they're putting out more propaganda
than we have seen at any time since 1992 when they said that we couldn't leave the European exchange rate mechanism. Do you remember that? They
said it would be a disaster. They said that interest rates would go up They said it would be an economic catastrophe for this country if we left
the European Exchange. That's what the treasury said. And w happened? It was liberation for this economy.
(END VIDEO CLIP)
QUEST: That's Boris Johnson. Chris Grayling joining me now from Washington. He's the conservative leader of the House of Commons. He is a
strong supporter of the leave campaign at the moment. Mr. Grayling, thank you for joining us. Look, the treasury has now done two reports, one in
April talking about how bad things would be, the longer term effects, permanently poorer. Now this second report saying, as you're showing the
one-year recession, on top of the IMF and OECD and KPMG and the other reports, surely you have to accept there would be a serious economic
dislocation if vote to leave wins.
[16:05:00] CHRIS GRAYLING, LEADER OF THE HOUSE OF COMMONS: Well, let' be clear. There's two points to make about the latest report. First of all,
it is a campaign document. It is not an independent analysis. The treasury and the government are campaigning to remain in the European Union
and that's fine they have choice. I'm fortunate enough to be one of the ministers that David Cameron given the freedom to campaign the other way.
But it's a campaign document and it assumes the worst. In a way that the way that the previous document assumed the worst.
The previous document assumed that we would have no free trade agreements of any sort anywhere in the world and still showed our economy growing.
This one, for example, assumes that we can't reach an agreement on trade with the European Union before the period of the Article 50, two-year
period, is up. So you have to treat it as that.
QUEST: Let's assume it's a document, But the IMF have said similar, and the OECD has said similar. I want to know from you, what is your model
post-Brexit that you are seeking? Because you know as well as I do, a Norway solution isn't correct. A Switzerland solution doesn't work either,
because both of them require you to take EU law and in some cases make contributions to the budget.
GRAYLING: Well, I'm arguing for a U.K. solution. Not a Norway one, not a Switzerland one, and the reason it will be straightforward to agree, is
that we are their most important market. The United Kingdom outside the European Union accounts for 17 percent of EU exports. We are a crucial
market for areas like French agriculture, German automotive. They're not going to jeopardize their access to our markets and so, therefore, of
course there will be a free trade deal afterwards and indeed, our Prime Minister, David Cameron, said that will be the case.
QUEST: How do you then get over the argument -- domino effect argument? They might give us some sort of a U.K. preferential deal and they are not
going to want to encourage any other country to believe that they could leave the union and still have access to the single market. Every
document, every piece of research suggests -- that I've read -- suggests there's no way that the EU is going to grant Britain access, if you like,
free access to the single market.
GRAYLING: Well, when you talk about free access to single market, you have to look at it from the prism of their manufacturers. There are 5 million
European jobs that depend upon British consumers. So it's as much about their access to our market, as to the other way around. We amount to17
percent of their exports. And of course there are precedents for trade free, tariff free trade with the European Union around the world. I'm not
looking for an extraordinarily preferential deal. All I'm looking for is the ability for them to carry on trading with us, without us imposing
tariffs on their products.
QUEST: What is then to stop? Let's just say your argument holds true and Italy or a Poland saying, right, we'll leave, as well. And we want the
same benefits that the U.K. got.
GRAYLING: Well, of course, the difference between the United Kingdom and those countries in the Eurozone is they don't have the option to leave.
One of my concerns, one of the reasons I'm campaigning to leave, is they have no choice but to integrate further in order to save the euro. We've
been through Eurozone crisis. We can't continue with the structural disparities of our own Eurozone. They will accept and Angela Merkel,
Wolfgang Tschapeller, the five presidents of the different EU institutions, the Italian Finance Minister, all accept that further integration has to
happen. So it's not a question of them leaving. They have to integrate further and our role in an EU that is integrating further within the
Eurozone, is very uncertain.
QUEST: You got some unusual support from a source that you wouldn't normally get. Nicola Sturgeon, the First Minister of Scotland. She has
basically warned today, the treasury and the British government not to come out with these Armageddon-style reports designed to fear, because she says
that might have a backlash and actually people will say, stick two fingers up, you know, don't you warn us what might happen. We'll make the
decision. Is she right?
GRAYLING: I think she probably is right and I have great respect for David Cameron and George Osbourne, but it was only a few months since they were
saying that of course, Britain could survive and flourish outside the European Union. So it's a bit rich at this stage to be saying doom, gloom
a disaster will follow.
[16:10:00] We heard a whole of string of arguments from the remain campaign, about how disaster will happen if we leave and I think people are
now seeing through that, and saying, look, this is a bit over the top, guys.
QUEST: Mr. Grayling, I'll be driving around Britain in my 1974 camper van, which we have bought especially for the occasion. I hope I can invite you
to have a cup of tea off the primer stove and discuss the issues in more detail.
GRAYLING: Happy to do so. Enjoy your tour.
QUEST: Thank you, Chris Grayling, the leader of the house joining us from Washington.
Now, Austria with a left wing economist as its next president. Backed by the Green Party, the independent candidate, Alexander Van der Bellenhas
defeated the Freedom Party's candidate, Norbert Hofer. Just over half percent of the vote prevented Hofer from becoming the EU's far right head
of state. Charles Lichfield is the European affairs specialist at the Eurasia Group. Charles joins me now from London. This -- I mean, a scene
from the establishment within the EU, this was as close as you ever want to get and it was too close to comfort for them, wasn't it?
CHARLES LICHFIELD, EUROPEAN AFFAIRS SPECIALIST, EURASIA GROUP: Yes, Richard. I think it was already much too close for the European
establishment. I mean, if you looked at the polls yesterday and most of the expectations that informed commentators were coming up with on
Saturday, most people expected Norbert Hofer to win. So is affectively a surprise. It shows that still in Europe people are willing to turn out to
vote against their being a far right leader in their country. Turnout was higher in the second round of the Austrian election than in the first
QUEST: But surely the point is not that they eventually defeated him, but that there was so much support in the first place and happenstance and an
accident on the way you end up with a far right leader eventually.
LICHFIELD: Exactly. That's where I was going. Effectively, we are 30,000 votes from there being a far right leader in a European country. One in
the west at that, one in the European Union for quite some time, although not a founding member. And this will be very concerning for European
elites, and for Austria's government, which is still formed by two parties that weren't in the second round. The center right and center left did
badly in the presidential election and that I think all goes very badly for the result in the 2018 parliamentary elections. I think most people expect
the FPO, so that is Norbert Hofer's far right party, to come first in this election.
QUEST: To our viewers who may not be as familiar, what is so wrong with a far right party being elected, providing it doesn't sort of take on
dictatorial tendencies? If legitimately elected on say for example, an anti-immigration policy or an Austria first policy or whatever, then surely
the union has to respect the will of the Austrian people in that regard. It is not the first time it's come close.
LICHFIELD: Oh, which would respect. I think that it isn't so much a problem of democracy and whether the union respects the result in a
particular country, they were getting ready to write an acceptance that Mr. Hofer was elected president. I think the problem is that people expect
looking at the sort of reading between the lines of Mr. Hofer's party's manifesto and other parties that are similar to it in Europe.
The problem is that they -- these parties expect once in power to dismantle certain institutions which underpin European integration and pull they're
countries out of it. You're very right that a lot of people would support that, but I think that's what worries I think capitals and elsewhere in
Brussels -- and people in Brussels, the fact that these parties once selected are interested in using the democratic legitimacy they have to
essentially change the institutions that are there.
QUEST: Charles, good to see you, sir. Thank you for putting that in context. We appreciate it, thank you.
Now on Saturday, he led the team to FA cup glory. A few minutes ago, he got the sack. It was a funny old game and Louis van Gaal is out as
Manchester United's manager. Talk about that after the break. QUEST MEANS BUSINESS, start of a new week together. Glad you're on board.
[16:16:24] QUEST: Somewhat bizarrely, Manchester United has fired its manager, just two days after he led the team to an FA cup victory. Nothing
like a victory to get you fired. Louis van Gaal was in the second year of a three-year contract. CNN's Kate Riley, joins us now from the CNN Center
in Atlanta. Kate, my knowledge of football is regular viewers of QUEST MEANS BUSINESS knows, can be written on the back of a postage stamp in most
cases. I understand there's a, you know, man you did well to get the cup, and appallingly in the league, and is that why van Gaal is gone?
KATE RILEY, CNN WORLD SPORTS: Yes, basically. They have had one disappointing season, Richard. That can be said for sure. Not only have
they had disappointing results on the field, look, the stats don't lie. They scored 49 goals this term alone. And that's actually the lowest haul
of goals in the league since back in 1990. So failing to qualify for the championing league, finishing in fifth. All bad news for Louis van Gaal.
And of course, his departure from the club was announced just a few moments ago by the Manchester United website. The executive vice chairman, Ed
Woodward had this to say, "I would like to thank Louis and his staff for their excellent work in the past two years culminating in winning a record-
equaling 12th FA Cup for the club. He has behaved with great professionalism and dignity throughout his time here."
As for the man himself, Louis van Gaal, he also issued a statement on Monday afternoon. And this is what he had to say, "It has been an honor to
manage such a magnificent club as Manchester United, and in doing so I have fulfilled a long-held ambition, Finally, my special thanks to Sir Alex
Ferguson and Sir Bobby Charlton for always making me and my family feel so welcome throughout my time as Manchester United manager."
So not only did he fail to qualify for champions league football last season, there are also reports back in the U.K. that he also lost the
dressing room. There's now that infamous clip of he sat next to the defender Chris Smalling and he refers to him as Mike, not realizing he's
got the player's name wrong, rather embarrassingly in front of the world's media.
QUEST: Just to jump in here, if you get fired, in which he's clearly been or let go and obviously a good deal because he said nice things on the way
out, I mean, at least it's, you know, he does go with a victory under his belt.
RILEY: Well, yes. He does. And it's the first piece of silverware in the post-Sir Alex Ferguson era at Manchester United, as well. Which the fans
will be happy about, but it's the style of play and the lack of firepower. And the way they played, and the lack of champions league football, which
has really left the fans disappointed this season.
Attention, of course, now turns to who will be the man to replace van Gaal. The favorite is Jose Mourinho. He used to manage Chelsea until he was
sacked last season. Of course the season before, he lifted the premier league -- he lifted the premier league title, the trophy, with the Chelsea.
His manager -- his agent, in fact, flies in from China on Tuesday to meet with representatives from Manchester United.
QUEST: Kate, thank you. Much appreciate it.
[16:20:00] We'll stay with football and the acting number two at FIFA has also been sacked. This time after a so-called breach of fiduciary
responsibilities. He Marcus Kattner, who was the acting secretary-general. He was the head of finance at FIFA. I spoke to World Sports, Don Riddell a
short time ago. Now clearly, what's Kattner alleged to have done.
DON RIDDELL, ANCHOR, CNN WORLD SPORTS: Well, FIFA haven't confirmed what exactly confirmed what exactly he was up to. It's been reported that
perhaps there were rather more bonus payments than he was entitled to. That's what is being reported, Richard, but FIFA haven't confirmed that.
Reportedly amounting to extra -- millions of dollars.
QUEST: So, Blatter is gone. Platini has gone over the issue of payments, bonus payments. Jerome Valcke was sacked for irregularities. Marcus
Kattner has now sacked over financial impropriety -- fiduciary responsibilities. Don, is this scapegoating or is this genuine cleaning
up? What do you think?
RIDDELL: I think it's too early to tell, quite honestly. I mean, I suppose this is a good thing that if we take FIFA at their word and didn't
know about it until the other day and acted so quickly that has to be a good sign. I think the reason that the jury is still out is because it was
only this month where we had Domenico Scala, the head of audit and compliance committee resigning in protest, because FIFA held a congress and
they basically changed the rules. They voted so that they would be able to have more control over the independent ethics committee and Domenico Scala
didn't like that and so he resigned immediately. So, you know, this has happened just in the lead-up to this new revelation, so I think it's very,
very difficult to know if FIFA is on the right frack or not. Because the Scala resignation really was a black mark against the idea that FIFA was
heading in a new an honest direction.
QUEST: FIFA is a cesspool of either dishonest transactions, strange procedures or downright illegal payments it would appear.
RIDDELL: Well, you may well be right, Richard. But this have been going on for many years and give the new organizations some credit. It's going
to take them a long time to get to the bottom of what exactly has been going on over many, many years in Zurich. We're only three months in to
the new, you know, presidency of Gianni Infantino. It's going to take him a long time to, you know, get to the bottom of everything and conduct
thorough internal investigations. It's going to take some time. I suspect we're going to be hearing more situations like this in the weeks and months
ahead. But yes, it's going to take FIFA a very, very long time to escape its dim and dark past.
QUEST: Don Riddell.
German drug giant Bayer is offering to buy U.S. agriculture company, Monsanto. The offer for $62 billion in cash and if approved it would be
the largest merger so far this year. Here's the latest example of consolidation in the agriculture and chemicals business. On CNN earlier,
Bayer's Chief Executive, Werner Baumann, discussed the strategy behind the offer.
(BEGIN VIDEO CLIP)
WERNER BAUMANN, CEO, BAYER: We have been looking at Monsanto and had many, many discussions over the past years about the ability to jointly create
something bigger than we can do individually. Interestingly enough, both companies see the strategic rationale exactly the same way and it's
actually all about how to ensure that the addition of 3 billion of people it will have by 2050 can be fed.
This can only be solved by innovation and actually both. Monsanto and us stand for innovation. One of us with the leading crop business in the
world. The other one with the leading seed business in the world and we firmly believe that the combination of those two can yield significantly
higher production of food in the world and with it is also a very sound business proposition.
(END VIDEO CLIP)
QUEST: Paul la Monica is with me now. What makes sense about this deal?
PAUL LA MONICA, CNN MONEY CORRESPONDENT: You have crop protection and seeds. That's what makes sense and when's a challenge is that there are so
many agriculture mergers in the works right now. Monsanto, remember, wanted to buy Syngenta. That didn't go through. Syngenta is now merging
with ChemChina. You have DOW and DuPont merging. So you through this into the mix, you know, anti-trust regulators around the world will have a field
day looking at all these.
[16:25:00] QUEST: Right. But I mean, working on the basis that he who started the transaction first gets to go first rather than the others. Are
there serious anti-trust issues with Bayer and Monsanto?
LA MONICA: There could be, but you have to look at it in combination with the other deals, as well. I think it might wind up being the case that one
of these deals may not happen because it's just too much consolidation in a quick period of time.
QUEST: When all those other deals began, I'm familiar with the concept, as soon as the gun is fired everybody feels they have to do a deal. Is this
what we're seeing here? As soon as DOW and all the others got out of the gate.
LA MONICA: I think when's happening with Bayer is that they are being opportunistic, because Monsanto, remember, was going to one of the
acquirers. And once they had to walk away from Syngenta all of a sudden they became vulnerable. And I think Monsanto became appealing target for
the likes of Bayer and wouldn't have been feasible if Monsanto and Syngenta had merged.
QUEST: What about the crops and issues that Monsanto has? Whatever you think about GM an all of these things, there are problems with many of
their crops in the European Union.
LA MONICA: Yes, there are definite concerns about that. It is a very controversial company. Obviously the term Franken Food is something that
comes the mind.
QUEST: It will have to be approved by regulators on both sides of the Atlantic. This is one of those that one side --
LA MONICA: Not just the U.S. DOJ.
QUEST: We've seen many cases where one's gone one way and one's gone the other. Good to see you as always, sir.
That was rather feeble. That's better. The U.S. markets finished today somewhat flat. I want to show you though. If you take a look at the
graph, or the chart. It does like it was a rather exciting day. But if you look at the range, we're only going from 17550 to 17440. So it's a
fairly narrow range and most of that range comes at the end of the day as we lose down 8 points. Barely changed with the DOW 17,492, off just a
On the European losses, they closed lower on Monday with the exception in Greece. Athens were higher after the government passed austerity measures
that could lead to further debt relief. I'm just making sure that says -- with my bad eyesight -- it's 1.5 percent not 15 percent. Yes. That's
right, 1.5 percent for the Athens General. Interestingly, as well, also, the question of whether or not the ESM will buy any of the debt currently
held by the IMF, which will give further debt relief toward Athens without the IMF being involved.
The Chief Executive of Viacom, Philippe Dauman, has filed a lawsuit in New York. What he's calling an unlawful corporate takeover. Now he claims the
daughter of Viacom's controlling shareholder, that's Sumner Redstone is scheming to gain control of the company. On Friday, the 92-year-old
Redstone, removed Dauman and another Viacom board member from a trust that will control Viacom after Redstone's death. He is 92. Dauman says that
Redstone is manipulated by his daughter. Now, what's included in the network? Viacom has MTV, Comedy Central, Paramount Studios, Black
Entertainment Network, Nickelodeon and VH1. So it's got a fairly wide range of assets. But all this wouldn't be so tantalizingly deliciously,
voyeuristic if a judge didn't already say that Redstone is competent, in the dispute with his former girlfriend.
So, what are they claiming here? That he's incompetent? That Shari the daughter is -- what? In the removal of Dauman? What are they claiming?
BRIAN STELTER, CNN MONEY, SENIOR MEDIA CORRESPONDENT: That Shari Redstone is pulling the strings, is the woman behind the curtain doing this against
Sumner Redstone's actual wishes. But we've statement after statement, statements flying back and forth and the bottom line is we don't know
when's going on. But according to Sumner Redstone's representatives, they people who say they are representing him, this is what he wants. To remove
Philippe Dauman from the trust.
The reality is talking about an aging 92-year-old media mogul. We don't know his exact condition. But we know he can barely speak at all.
Recently when he was deposed, it sounded like he was grunting and moaning during the deposition. So it's an unclear how much he's in command of the
faculties, but his lawyers and spokesman say he is well enough to be able to remove Philippe.
QUEST: In the case of the former girlfriend who's trying to get part of the estate there as I recall, the exact facts, there the judge was clear
that Redstone had made the wishes known he wanted Shari, his daughter, to make his medical decisions. So, bearing in mind that there is this
precedent already just two weeks ago, a week or two ago, why would Dauman think that he gets another shot of something that says Redstone's not able
to make this decision?
STELTER: It does seem like Shari Redstone has the advantage right now. And Dauman is in a much tougher spot. Of course, the CEO of Viacom, the
chairman of Viacom.
[16:30:00] QUEST: He stays that.
STELTER: And he is. As of today he is. Look on the website, he's the boss. And yet suing the controlling shareholder. It's a shocking story
and it's also a sad story. A lot of people thought we would get to this point and now it's actually happening. Unclear how Sumner Redstone's
health is. But clearly he and Shari Redstone have rekindled their father/daughter relationship. You know, they were estranged for a long
time. Now they're back in each other's lives and Philippe is on the way out.
QUEST: Are they saying here that Shai made the decision not Sumner Redstone or that Shari made the decision and Sumner Redstone approved it?
Is it clearly Shari made the decision or executed the decision. But was it his decision? Is that what this is really all about?
STELTER: is charging that Shari Redstone is manipulating her father and doing it in an illegal way. They are calling this an illegal corporate
takeover. And of course we're talking about so many brands under Viacom. Also, Sumner Redstone has some control of CBS. We've heard nothing out of
QUEST: If I want to read reliable sources, which is you're excellent, how do I sign up for it?
STELTER: CNNmoney.com/media. We'll be covering this all night long.
QUEST: CNNmoney.com/media. You can sign up for Brian's superb daily reliable sources briefing on the media industry.
STELTER: Thank you.
QUEST: We continue from pointing weapons of each other to selling them to each other. The U.S. is opening arms to Vietnam. We'll have that story.
This is QUEST MEANS BUSINESS.
QUEST: Hello. I'm Richard Quest. There's more QUEST MEANS BUSINESS in just a moment. I'll be talking to the world's biggest insurance company,
which says it will no longer invest in tobacco. Decades after they went to war United States is now lifting the arms embargo on Vietnam. For all of
that, this is CNN and on this network the news always comes first.
ISIS claiming responsibility for a series of attacks that left more than 120 people dead. State media said a least 78 people killed in explosions
in 2 Syrian towns. Three bombs went off at a bus station, four others in a residential area.
And in Yemen, local officials say at least 43 people are dead and 2 more explosions.
Operation to drive ISIS out of the Iraqi city of Fallujah is under way. Iraqi troops have moved into the city backed by U.S. and coalition air
strikes. The Iraq military reports suggest early progress and predicts quick victory.
(BEGIN VIDEO CLIP)
KHALED AL-OBEIDI, IRAQI DEFENSE MINISTER (through translator): The operation's going very well. More than expected. The enemy is completely
collapsing. Our troops' spirit is very high because of the victories and due to all of that we think the battle of Fallujah is sealed soon.
(END VIDEO CLIP)
[16:35:00] QUEST: About a month to go before the U.K. votes on whether to leave the EU. There's been a strong warning from the British government.
It says a Brexit would lead to the end of economic growth and a recession. Speaking to me on QUEST MEANS BUSINESS, the leader of the house of commons,
a Brexit supporter, says he doesn't believe the U.K. treasury report.
(BEGIN VIDEO CLIP)
GRAYLING: It's a bit rich at this stage to be saying doom, gloom and disaster would follow. We've heard a whole of string of arguments from the
remain campaign, about how disaster of things will happen if we leave. And I think people are now seeing through that, and saying, look, this is a bit
over the top, guys.
(END VIDEO CLIP)
QUEST: A French navy is continuing the search for wreckage of EgyptAir flight 804. The plane with 66 people on board went down in the
Mediterranean Sea last Thursday. Some debris has been found and at this point the plane's fuselage and with it the flight data recorders are still
The Baltimore peace officer Edward Nero has been found not guilty of all charges in connection with the death of Freddie Gray. Mr. Gray died in a
police van while in custody. His death sparked protests and became a symbol of distrust between Baltimore's black community and the police.
It's been more than four decades since U.S. troops pulled out of Vietnam and now the countries are setting up new and deeper ties. In Hanoi,
President Obama announced the end of a decades old ban on the sale of military equipment to Vietnam. Mr. Obama denied that the move aimed at
countering China's growing strength in the region. CNN's Saima Mohsin, has this report from Hanoi.
Reporter: in the first trip to Vietnam, President Obama said he was looking to make a significant upgrade in cooperation and then came this.
(BEGIN VIDEO CLIP)
BARACK OBAMA, U.S. PRESIDENT: The United States is fully lifting the ban on the sale of military equipment to Vietnam that's been in place for some
50 years. As with all our defense partners, sales will need to still meet strict requirements, including those related to human rights.
(END VIDEO CLIP)
SAIMA MOHSIN, CNN CORRESPONDENT: This American B-52 bomber brought down in 1972. It remains here as a symbol of the Vietnam War. President Obama has
termed this trip symbolic of the renewed ties between the two countries. And the lifting of the complete ban against sales of arms to Vietnam is
perhaps symbolic of how the two countries have moved on from a relationship of one of being enemies to friendship and real partnership.
(END VIDEO CLIP)
MOHSIN (voice-over): President Obama's historic move paves the way for Vietnam to import a range of U.S. defense technology and experts tell me
it's the quality not quantity of equipment Vietnam is looking for.
NGUYEN NGOC TROUNG, VIETNAM CENTRE FOR STRATEGIC STUDIES AND INTL. DEVELOPMENT: How to protect our maritime security and coast that is
priority. And in that I think that Americans equipment at best. There would be some radar for airplanes, radar for the ship, radar on the
MOHSIN (voice-over): analysts say Vietnam will use its enhanced maritime capabilities to stave off China's aggressive expansion in the South China
Sea. They expected China to view this as further U.S. interference, but when asked about the move, Beijing appeared to welcome it.
(BEGIN VIDEO CLIP)
HUA CHUNYING, SPOKESWOMAN, CHINESE MINISTRY OF FOREIGN AFFAIRS: We hope the lifting of all such bans will benefit regional peace and development.
And we're happy to see the United States and Vietnam develop normal cooperative relations.
(END VIDEO CLIP)
OBAMA: And I want to congratulate Vietnam for the extraordinary progress that it's made.
MOHSIN (voice-over): President Obama's move has been slammed by human rights activists saying he's disregarding Vietnam's human rights record.
Recent protests against an environmental crisis have been suppressed with a stern government crackdown, a sign freedom of speech is far from free in
this communist state. Which is why rights group are saying the United States has rewarded Vietnam for nothing in return. Saima Mohsin, CNN,
QUEST: Wherever we look in the world there are risks. Whether it's Brexit, the interest rates, foreign exchange, the dollar, we're going to be
talking about those sort of risks and CEOs are doing.
[16:40:00] Dennis Nally is with us and Dov Seidmen is here. Gentlemen, we have seats for both in the C-suite. Risk, it's all about risk. It's all
about risk. You can say whatever you like. Over there.
It's all about risks and what CEOs are saying. The head of the San Francisco Federal Reserve puts the odds of a June interest rate rise at
some 50 percent. John Williams says the U.S. economy is back on track and there could be two or three rate hikes this year. In the C-suite, real C-
suite heavyweights. Dennis Nally, Chairman of Price Water House Cooper International, which recently came out with a survey. And Dov Seidmen, the
head of LRN which promotes good governance and business ethics. You are in the wrong place here.
DOV SEIDMEN, CEO LRN: It's nice to be here.
QUEST: Let's start with what your survey is showing at the moment of what the risks are and CEOs are failing to do.
SEIDMEN: CEOs are slowly coming to grips with the fact that we are living in a reshaped world. The world not just dramatically changed, its
dramatically reshaped. It operates differently. The idea that business and business are somehow separate from society is over. That business no
QUEST: Surely they only fooled themselves if they believe that in the first place.
SEIDMEN: But the ability to maintain a separation of business and society is over. Millennials, the largest group joining the workforce are
insisting, and they're more vocal. They're not the first to discover meaning but they are insisting on working for bosses that are inspiring and
for companies that solve real problems in a world and do good.
QUEST: Good luck to them.
Dennis, the biggest risk at the moment are your members, your clients or your customers, are they worried about Brexit?
DENNIS NALLY, CEO, PWC: Absolutely. You know, I would say on a broader scale, Richard, I think the whole issue around when's happening from a geo
political standpoint is top concern to CEOs. In fact, as you know, when we release our global CEO survey in Davos this year, the geo political risks
were number two area that the CEOs where most concerned about --
QUEST: Which risk in particular?
NALLY: Well, just all the uncertainty around what's happening from a geo political standpoint, whether it's the Middle East, whether it's Brexit --
I put that in that category. All of this creates uncertainty. As you know, business CEOs want certainty. They want predictability. They want
QUEST: But if I think back over the last eight years, since the great recession, before what, I mean, ERM crisis, U.S. various crisis,
uncertainty is not new. What's different now?
[16:44:42] SEIDMEN: What's different now is that we can see an unprecedented -- companies not just x-rayed they are getting MRIs. From
Panama papers, Sony gets hacked, Panama Papers, we are seeing deep into the inner workings of organizations and the attitudes and beliefs and mind-sets
of the people who run them.
[16:45:00] There's unprecedented transparency. When you get a hold of it you can cheaply tell the whole world about it. And the companies for the
first time are dealing with moral issues, gender equality, religious freedom laws, pay equality. For the first time CEOs have to stand -- come
forward and say this is what I believe and there's no way to say it's just business. You have to have a point of view.
QUEST: This is fascinating but I wonder in the past, Dennis, let's take North Carolina at the moment. Now, we have had, you know, we have had the
proponents of the bill on this program saying this is what we believe in. But surely, Dennis, CEOs on the North Carolina anti-transgender law have to
say we won't -- as PayPal did -- we won't invest. We're going to stand by our principles.
NALLY: Well, absolutely, Richard. It is a great example where I think if you would have gone back five, ten years ago you would have seen CEOs more
reluctant to take that type of a position.
QUEST: OK, to both of you. Do we have the CEOs -- I was going to use a rude word here but I won't, with the necessary equipment to take these
decisions? CEOs in many cases just want to avoid controversy.
SEIDMEN: You cannot avoid controversy. Moral neutrality in a morally interdependent world where we rise and fall together is no longer an
option. They're going on a journey to try to come forward by an attachment to a purpose that allows people to say this is what the company is about
and this is how we're going to operate.
NALLY: Let me build on this one because this is really important. I think the CEOs don't have a choice today because the millennials, the people
they're out there trying to hire today, they want to join institutions that stand for something. More than a paycheck. They want to make a
contribution for the greater good, greater society.
QUEST: I disagree with both of you.
NALLY: That's one of those where we can agree to disagree.
QUEST: No, no. On the fact -- I'm sure but I disagree with you. I think CEOs in many cases lily livered, weak and cowardly waiting to see which way
the wind is going to blow before they take a position on something of morality.
SEIDMEN: But CEOs are leaders and good leaders don't just look at the headlines, they're looking at the tread lines. And they're seeing where
the world is going. And they're going on this journey and first of all one adage is true in business. You manage what you measure and what you
measure is what you get. And right now we have measured this. Companies that are putting purpose and values at the center are starting to
outperform those that don't.
QUEST: Do you have a position on North Carolina?
NALLY: I certainly do. And we would say it ought to be open. We should accommodate the wishes and needs of all of our people and that's the way we
would think about it from a PWC standpoint.
QUEST: Do you have a position on Brexit either of you?
NALLY: Absolutely. Personally, and at PWC, because we've done a very interesting report that's been released. We think the exit of the U.K.
from the EU will be a disaster from an economic standpoint. A disaster to the U.K. A disaster to the EU and a disaster to the global economy. Why?
Because of all the uncertainty that this is going to create. All the unknowns, all the unintended consequences that nobody has really put their
fingers on at this point in time. And that is exactly what is not needed at this point in time in terms of the global economic recovery.
QUEST: Nobody will accuse you on being on the fence. Gentlemen thank you very much indeed.
Let's continue with the thought about CEOs taking an issue of morality. Smoking is prohibited in the AXA offices. Now investing in smoking is
banned, as well. I'm told why AXA waited until now before disinvesting from tobacco. This is QUEST MEANS BUSINESS.
[16:50:55] QUEST: Quitting smoking is hard and for the world's largest insurer it will be also be extremely expensive. Let's talk about AXA,
which will sell $2 billion worth of tobacco assets. That the insurer currently has across the portfolio. Now, the reason is AXA can't invest in
an industry that kills 6 million people each year for the very obvious reason it's an insurance company. So it's paying out of the door for one
hand, while investing in the product that's killing people.
Some public sector funds have already quit, notably, Norway's Sovereign Wealth Fund. California employees, CalPERS, has also with their retirement
scheme, has also pulled out. And famously, CVS pharmacy stopped selling tobacco products in 24 hours. The company says overall sales dropped as a
result, but they maintain their position. The other big drugstores in New York, Dwayne Reed continues to sell. Which all seems a bit weird since in
the left aisle they're selling health care goods and the right aisle they're selling cigarettes. But that gives you an idea.
However, investing in the smoking industry and in tobacco, certainly pays. The major tobacco firms are up some 33 percent since 2015. If you take
this and you compare it to the tobacco and S&P and get an idea and look at the gains they have seen by contrast. The S&P is flat and if you look --
just look at this. There you start in January. Tobacco goes up like a rocket. S&P just to tootles along. Alice Steenland, is AXA's chief
corporate responsibility officer. She joined me live from Paris, when I asked her why AXA waited until now to divest.
ALICE STEENLAND, CHIEF CORPORATE RESPONSIBILITY OFFICER, AXA: The nature of disease has changed. So 68 percent of deaths worldwide now are caused
by non-communicable diseases. These are diseases not infectious diseases. These are lifestyle diseases. Things like smoking are driving this level
of disease and of death. So the nature of health care's changing which means that both organizations like the World Health Organization, but also,
anyone who works in health care like AXA, we are one of the world's largest insurance companies, and the nature of what we're doing is changing, too.
Much more focused on prevention.
QUEST: But I realize that smoking is a more extreme example, but once you go down this road, it's not long before somebody says, well, you are
investing in armament companies or any form of defense related. And then even if that's an easy get, you end up with alcohol companies and
distilleries. And before long, you end up with fat food and manufacturing companies.
STEENLAND: Yes, you're right. We've heard that before, the slippery slope argument. Tobacco for us is a case that's very different in the sense
there's no healthy amount of tobacco so unlike sugar or fatty foods or even alcohol, there is no safe threshold for smoking and for tobacco. So for
us, it is quite a case of heart and when you think about the fact that two thirds of all people who start smoking will die from a tobacco related
disease I think when you're in the health care insurance business this is really something that makes you think twice.
QUEST: But you can see that it is -- you know, if not a slippery slope then it certainly is a sliding flaw where you need to be careful. Because
there are so many, you know, pressure is going to be brought to bear on AXA by a large number of lobbyists and pressure groups for various different
causes. And there needs to be a certain robustness in standing up to that in many cases.
[16:55:00] STEENLAND: Yes. You're absolutely right. Last year, we had an announcement around the same time, which was the group's divestment from
coal. And we were actually very surprised at the reaction because we were, again, the first insurer to make that choice. And immediately, we saw that
the entire industry was going in the same direction. We're very much hoping that that's going to happen with tobacco, especially for insurance
companies that are in the health care businesses. But, yes, it's something to keep in mind. But again for us tobacco is a very specific case that we
don't see elsewhere.
QUEST: The problems of AXA and tobacco. We'll have a Profitable Moment after the break.
QUEST: Tonight's Profitable Moment. The U.K. treasury has brought out another report claiming doom and groom if the country votes to leave the
European Union. The problem is that there's now a chorus of reports all saying that things will be dreadful. And it's ignoring the issue, in my
view, for the undecideds. Many of whom don't really care about the question of economics. They know they will be in effect, but the actual
vote is about more than just an immediate economic fallout if you like. It's a long-term forecast and that I think merely turns people off. When
they see these report, one after the other after the other suggesting economic doom and gloom. It sort of makes people say, well, we'll have the
final decision. Never mind what you say.
The vote takes place on June the 23rd. I'll be driving around the U.K. in my own 1970s Bedford caravan. We'll tell you more about that in the weeks
ahead. And that is QUEST MEANS BUSINESS. For tonight. I'm Richard Quest in New York. As always, whatever you're up to in the hours ahead, I hope
it's profitable. I'll see you tomorrow.