Should Business Execs Meet at Strip Clubs?

Do we even need to ask this question in 2006? Apparently we do, as USA Today reports today that some business executives haven’t gotten the memo that meeting in strip clubs subjects their firms to liability for sexual harassment and discrimination, and still end up providing strippers with a significant percentage of their income. (See USA Today article.) And to make matters worse, all the fun and hilarity is a tax-deductible business expense. How many millions in disgorged assets will it take for some dummkopfs to learn that having meetings in places where some of your colleagues feel more than a little uncomfortable is a bad idea?

The article begins with stripper Nicolette Hart explaining how she can make up to $2,500 a night with investment bankers and their clients in a Manhattan strip club’s private rooms. Hart, who once worked for a venture-capital firm before apparently fulfilling her true ambition, says she always asks what brought the men together. They often respond that they’re having a meeting. Her response to that? “I say, ‘You’re having a business meeting in a strip club?'” (See USA Today article.) See, guys, even the stripper knows it’s a bad idea — why don’t you?

Adult entertainment is a tax-deductible business expense allowed by the IRS. However, Wall Street, stung by a number of high-profile sexual harassment and discrimination verdicts, is finally taking the lead in cracking down on the practice. According to the USA Today article, the NASD and the New York Stock Exchange both recently proposed rules that would force firms to adopt business entertainment policies that cap amounts and specify appropriate venues, which will rule out company-paid or work-related strip club jaunts at the more than 5,000 brokerage firms in the USA.

You might think that common sense would obviate the need for such a rule, but apparently not. According to Hydie Sumner, someone who’s been there,

There are two levels of discrimination: the frat house environment in the office and the deeply embedded practices that are just starting to be uncovered, like the distribution of accounts, business leads and promotions. When ‘business activities’ involve the strip club, golf course or hunting ranches … discrimination is often perpetuated as those in power support and advance those with like minds and tastes.

[Sumner is a financial consultant who was awarded $2.2 million in 2004 after suing Merrill Lynch for gender discrimination. See Registered Rep Magazine article.]

Echoes Piper Hoffman, who represented Morgan Stanley plaintiff Allison Schieffelin, says that on Wall Street, “Who you know can translate into how much business you bring into your company.” [Piper is with Outten & Golden, a NELA-member firm headed by WF’s co-founder, Wayne Outten, who is pioneering the use of WF’s new product, WF Works. She has also generously assisted Workplace Fairness a great deal recently with editing the content on our website’s “Know the Law” area, so consider this a personal shout-out and thank you.]

Hoffman and Outten’s client Allison Schieffelin in 2004 spearheaded a sex discrimination lawsuit against Morgan Stanley, which ultimately settled for $54 million. One of the incidents Schieffelin raised in her lawsuit was a time when two clients were invited by male colleagues to attend a weekend in Las Vegas approved by their manager. When Schieffelin asked why she wasn’t included, she was told it was “because the men would be uncomfortable participating in sexually oriented entertainment with a woman colleague present, especially one who knew their wives.”

No one is trying to say that business executives — or anyone else for that matter, male or female — cannot go to strip clubs, on their own time and own dime. But when some employees are having tax-deductible “business meetings,” at a location where some of their colleagues are clearly not welcome, they shouldn’t be surprised when bad things like lawsuits, terminations, and NASD rules result. As one lawyer quoted in the article recommends, let’s just make it a relic of how business was done in the past, like the three-martini lunch.

More Information:

Workplace Fairness: sexual harassment; practical information on sexual harassment

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Madeline Messa

Madeline Messa is a 3L at Syracuse University College of Law. She graduated from Penn State with a degree in journalism. With her legal research and writing for Workplace Fairness, she strives to equip people with the information they need to be their own best advocate.