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The Strange History of Corporate Sex Scandals

By Julie Berebitsky
February 21, 2013 10:59 AM EST
In 1959, executive sleaze took on new cultural -- and economic -- significance.
Source: Associated Press
In 1959, executive sleaze took on new cultural -- and economic -- significance.

Americans are on familiar terms with the sex scandal. Liaisons in business and politics are regularly reported in sordid detail, and typically explained as the boneheaded decisions of smart and successful men under the influence of power and libido.

In the 1950s, such scandals briefly provided an opportunity for a larger national conversation, one that questioned the ethics of corporate America’s focus on the bottom line and generated the first systematic advice regarding how to keep sex from hurting profits. As Max Lerner, a columnist for the New York Post, summed it up, the “reach of the business spirit into sex or perhaps the reach of the sex drive into business enterprise” was a new social and commercial reality.

The occasion for this realization was the radio broadcast, on Jan. 19, 1959, of Edward R. Murrow’s “The Business of Sex,” in which the CBS journalist who stood up to Senator Joseph McCarthy exposed how companies large and small routinely used call girls to close deals and wrote off the cost as a business expense. Some companies, the program charged, kept prostitutes on their payrolls, listing them as employees in the public- relations department. In New York, Murrow reported, as many as 30,000 women made their living helping to grease the wheels of industry.

Anonymous executives on the broadcast described the when, where and how, while a number of women recounted their experiences of being paid to “date” businessmen. One preferred this job to her experience as a secretary, in which married executives repeatedly asked her out. Another secured a “verbal agreement” for an order of appliances before she went to bed with a company’s client because he was in a “very anxious mood.”

National Character

The broadcast struck at the heart of postwar concerns about manliness and the nation’s character, concerns that often focused on the white-collar world. After the war, with one in five privately employed Americans working for one of the top 200 corporations, the independence of the nation’s men seemed at risk. A country of rugged individualists, critics warned, was giving way to one of paper pushers.

Murrow’s expose suggested something even more unsavory. Capitalism itself was implicated, lending the story national significance in the Cold War effort to prove American values superior to those of communism.

Questions about the ethical fiber of American businessmen had been growing in urgency since 1948, when Alfred Kinsey published “Sexual Behavior in the Human Male.” Twenty-seven percent of Kinsey’s subjects who had attended college admitted to infidelity by age 50. Kinsey’s report spawned numerous studies on adultery among white-collar men, which psychiatrists often traced to the “competitive and hard-paced” aspects of modern business and middle-class materialism.

Evidence of the use of prostitutes in business also began to proliferate. In 1957, authorities charged Nella Bogart, a Polish refugee, with providing prostitutes for General Electric Co. (GE)’s sales convention in Atlantic City. Time magazine suggested that GE had finally taken the concept of “being nice to big customers” too far. Bogart’s attorney asked the jury to consider whether the executives who testified to hiring Bogart were “any better” than she was. They voted to acquit.

A Backlash

There was no jury to adjudicate Murrow’s charges, but big business immediately denied them. The Hearst chain of newspapers called the program an “outrageous insult to the great institutions that form the backbone of America’s economic strength,” and also condemned it for providing fodder for communists: People throughout the developing world would soon hear that the U.S. had “reached such a state of decadence its business could be transacted only with the aid of ‘call girls.’” Meanwhile, the Internal Revenue Service confirmed that some companies had tried to claim these expenses as business deductions. (Such charges, the IRS assured the public, were disallowed.)

Some commentators emphasized the positive. If nothing else, Murrow’s report disproved those, such as novelist Norman Mailer, who argued that the supplication required to climb the corporate ladder robbed men of their virility. As Max Lerner asked, did Americans really want “the Russians to believe that the virility of capitalism thrives only in boardrooms, never in bedrooms? No, a thousand times no.”

But if such adventures were good news for those worried about businessmen’s libidos, the consensus was that sex scandals weren’t beneficial to corporate America’s image. Just a few months later, another scandal -- this one involving the high- living Eli Lilly & Co. (LLY) executive Forrest Teel, who was murdered by his spurned mistress, a former file clerk -- again raised questions about the kinds of men who captained American enterprise. When the judge allowed radio and film crews into the courtroom, the trial became an international spectacle.

Murrow’s program had ended with a call for Americans to examine the larger cultural implications of using sex to promote business. In other words, this wasn’t a story “about sex.” Rather, it was about “the social ethic of our society” and “our capacity to treat each other merely as commodities.”

Conversation along these lines was short-lived, however, and was replaced by a discussion of how to manage the negative fallout that could accompany the mixing of business and pleasure. This was most evident in personnel journals, such as Modern Office Procedures, which increasingly urged companies to develop policies that would ensure that consensual relationships, adulterous and otherwise, didn’t damage morale and productivity or, in the case of executives, become a PR nightmare.

Despite this advice, companies expressed an unwillingness to pass judgment on an employee’s personal life unless it clearly threatened the bottom line.

In many respects, that’s where things remain today. Laws against sexual harassment changed the sexual culture of the office in some ways, but the majority of American businesses (70 percent by some estimates) still don’t have policies governing consensual relationships.

It’s also unclear to what degree a sex scandal can affect business by alienating customers or hurting profits. Though certainly the loss of a talented executive can cost a company in a number of ways, the lesson of GE’s prostitution crisis was that its bottom line survived intact.

The company did, however, decide to invite wives to one yearly sales convention. And that, for the time, was change.

(Julie Berebitsky is a professor of history and the chair of the women’s and gender studies program at Sewanee: The University of the South. She is the author of “Sex and the Office: A History of Gender, Power and Desire.” The opinions expressed are her own.)

Read more from Echoes online.

To contact the author of this post: Julie Berebitsky at jberebit@sewanee.edu.

To contact the editor responsible for this post: Timothy Lavin at tlavin1@bloomberg.net

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