Does the Club Still Matter?

The year was 1873. Andrew Carnegie, a Scottish immigrant who earned a fortune with railroad and iron investments, and Henry Clay Frick, a successful investor whose company operated coke ovens in Connellsville, Penn., recognized the importance of steel to America’s future. With mutual interests and common problems, these two industrialists were thinking merger, but they needed a private place in Pittsburgh, near their headquarters, to discuss their plans, make their deal and, perhaps, smoke cigars and play billiards. They formed the Duquesne Club, where, for a fee of $200 and annual dues of $50 (now $8,000 and $2,420), a member could have access to a dining room and leisure and recreation in a private setting.

“What is unique to the Duquesne Club,” says Melvin Rex, executive director for the past 35 years of a club that is a symbol of what is now a veritable institution in American business life, “is that there are 35 corporate suites affording executives all the privacy they need. Then there’s the President’s Room, where you have to be a company president to belong. On any given day, we’ll have the presidents of US Steel, PPG and Mellon, who come and go to this room just like the Carnegies and Fricks used to.”

Exclusivity remains the key to private clubs, where CEOs and others socialize and do business out of the public eye. In addition to higher fees and modern amenities like fitness centers and programs on the threat of terrorism or other current events, a few things have changed since Carnegie’s era. Spittoons are gone from the halls of the Duquesne Club, for instance, and members voted in 1980 to admit women into that Pittsburgh institution.

If the oak-paneled walls of these exclusive establishments could talk, they would tell illuminating stories. But walls can’t talk and neither can some club managers whose house rules ban publicity. A handful of CEOs spoke to us about their clubs and why they like them. Others turned down our requests for interviews or spoke anonymously.

Why the hush hush? Said one CEO who refused to be named, “The membership of most of these clubs is confidential because they’re afraid their discriminatory policies will be unveiled.” Many clubs admit few women, Jews, blacks or other minorities. In New York City, for instance, private clubs circumvent discrimination laws by forbidding business transactions on the premises. As purely social establishments, they can bar whomever they please.

Most executives are too accustomed to being singled out and set apart to dwell on what it means to belong to an exclusionary establishment in today’s climate of public accountability. “Clubs are a networking thing,” said one CEO anonymously, “so you join a club because it’s not available to everyone.” Another said, “Let’s face it, clubs are the last bastion of freedom, and it’s my private right to belong.”

Herbert V. Kohler Jr., chairman and president of toilet and sink maker Kohler Co., insists he’s not a club joiner, but ironically, last summer he built the luxurious Riverbend Club in Kohler, Wis., for conferences, family gatherings and special access to four world-class golf courses. “You’re removed from the hurly-burly, and it gives people in the Midwest access to a great variety of recreational amenities,” says Kohler. When asked why he built a private club if he does not belong to any himself, Kohler replied, “The only reason for a club is if it can give you an environment that you can’t get otherwise through the public domain. A club has to give you something special.”

William Berkley, chairman of W.R. Berkley, a publicly traded insurance company in Greenwich, Conn., and a member of the Harvard Club in Manhattan, says, “If you don’t live in the city, a club is a way for CEOs to meet with people in an ambiance that feels a little less commercial than a restaurant. You can go to a club and feel the intimacy-it’s closer to your house than a restaurant.”

Clubs have always played a big role for men and a less important role for women, says Cathleen Black, CEO of Hearst Magazines. “I’ll come across men who belong to eight clubs around the world. For them, it’s a perk of their business.” Black adds: “In the media business, part of the luncheon ritual is to be seen. The downside on private clubs is that they are stuffy, the food isn’t as good, and they’re not a chic place to be seen.” Black entertains more often than not at the Four Seasons, one of New York’s premier restaurants, but belongs to the Glen Arbor Golf Club in Bedford Hills, N.Y., and to the New York Athletic Club, which she uses for breakfast, lunch and family occasions.

Like Black, Keith Reinhardt, chairman of advertising agency DDB Worldwide, prefers to entertain at the Four Seasons. “Julien [an owner] lets me wear my crew-neck sweater, not like at some of the private clubs where you must wear a jacket and tie and women can’t wear open-toed shoes.” Reinhardt says he would never join a club that discriminated against anyone, and “probably wouldn’t get in anyway because I never went to college.”

From Davos to diners
“Everyone in the banking community is heavily into golfing, so I am very fortunate that my board members have memberships to some of the greatest golf courses in the country,” says Elisabeth DeMarse, CEO of Bankrate, which provides personal finance information over the Web. “Clubs and networks are clearly valuable shortcuts for tapping resources and serendipitous business building. It’s who you know but in a relaxed and comfortable environment.” DeMarse belongs to the Harvard Club and the Cosmopolitan Club, a venerable women’s business leader’s club in New York. But DeMarse’s favorite exclusive business association is participating in the World Economic Forum, held last February in Manhattan. “I came back with 200 cards and more international contacts than when I spent a year in international corporate development,” she says.

“The role of a club as a perk in a CEO’s life is zero,” insists Arthur Shorin, chairman and CEO of Topps Co., a bubble gum and trading cards maker. Nor does he believe that clubs help in career advancement. “Every rung of the ladder one ascends puts that person into a new level of responsibility to be effective and to set a good example.” Still, Shorin belongs to Glen Oaks in Old Westbury, N.Y., and to The Falls in Lake West, Fla. He also belongs to New York’s Friar’s Club because “it is convenient and relatively quiet, but it’s a personal expense because I don’t use it enough for business.”

Not every club need be exclusive to be a favorite among CEOs. Arkansas’ Lt. Gov. Winthop Rockefeller, grandson of John D. Rockefeller, says, “If you’re in a major metropolitan community, clubs can provide a quiet place to cement a relationship. In the mid-South, a club is nice but we can close a deal in my house or office. You’d be amazed what happens at Homer’s Diner, a blue-plate special restaurant in an industrial district near the airport. Here you’ll find politicians and CEOs. Sam Walton used to drive a beat-up old pick-up to Homer’s.” Many others, however, prefer to be driven in a luxury car, to their favorite oak-paneled hangout.

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