(FORTUNE Magazine) – In February at the Pebble Beach Golf Links, amid the crashing waves of the Pacific and bellowing sea lions, three dozen of America's most powerful business leaders gathered for a showdown. Among the FORTUNE 500 CEOs, dealmakers, and money managers was Phil Purcell, the ultra-competitive top executive at Morgan Stanley. He could be spotted walking up a fairway with Motorola's Chris Galvin. Not far away, Scott McNealy of Sun Microsystems lashed a ball 275 yards. Comcast's Brian Roberts, Mike Eskew of UPS, Wachovia's Ken Thompson, AT&T's Dave Dorman, Bob Walter from Cardinal Health, and financier Ted Forstmann were also among those arriving in private jets and courtesy cars. At the end of the first day, the clubhouse leader was none other than bond guru Bill Gross, whose "short game," it seems, rivals his instinct for interest rates.

The official occasion was the AT&T Pebble Beach National Pro-Am--a popular event on the PGA Tour. But despite the TV cameras and throngs of onlookers, the real action didn't start until after the 18th hole.

At dinner parties thrown by Forstmann at the elite Club XIX, by Charles Schwab at the Beach Club, and in the private homes of others, investment bankers could be overheard trading golf tips with CEOs. Mutual fund managers commiserated with rivals at hedge funds about putts thwarted by the mythical "cellophane bridge" over the hole. There was joking about the time IBM's Lou Gerstner walked the course with bodyguards and a personal photographer. A few recalled how Australian media mogul Kerry Packer won the event years earlier, reportedly with an inflated handicap. There was speculation about the future facing Frank Quattrone. The once all-powerful investment banker, suspended by Credit Suisse First Boston days earlier, owns a house on the course and was playing in the tourney. You could even overhear gossip about which pro golfer inelegantly suggested that a tournament sponsor provide him with a female escort.

Almost any topic was open for discussion--except, that is, the one that would have come most naturally. These lions of the business world barely purred a word about what they do. They didn't discuss money or power or influence--at least not directly. Even Donald Trump clocked what might have been a personal best for fewest mentions of his surname followed by the words "National," "International," or "Towers."

There is an unwritten rule that a member of this elite bunch is not to boast, brag, or appear to be trying to cash in on relationships. To so much as hint at a future business deal is a breach of etiquette, as bad as using a cellphone on the course or wearing short pants on a hot day. "To talk business," explains New York investment banker Eric Gleacher, "would be in very bad taste."

But make no mistake: Business was happening, just as it does whenever the movers and shakers step onto the first tee. At this lofty level deals come from relationships--and at Pebble Beach, many of the men had been friends for years. They had served together on corporate boards, on presidential commissions, and on the Business Roundtable. They'd invested in the same hedge funds and hired one another's children for summer jobs. They even dressed in similar white turtlenecks and khakis. What's more, they'd sponsored each other for membership in the best clubs. You could see the badges of these interlocking relationships emblazoned on jackets, ties, and belt buckles--the lone cypress of Cypress Point in California, the striped shield of Pine Valley in New Jersey, the Indian chief of Seminole in Florida, the red flag of Augusta National in Georgia.

Such emblems are akin to a secret handshake. They suggest that in the age of e-mail and teleconferencing, golf remains the true communications hub of America's business elite. Up-close glimpses of this tradition-bound milieu are rare indeed. Few outsiders have witnessed seven-figure executives lobbying in quiet desperation--often for years--for acceptance into a top-tier club, or observed the Victorian-era rules that govern who can join, what can be discussed, and how people conduct themselves.

Men of power endure this because golf has always been far more than a game. The greatest clubs in the country--Augusta, Oakmont, Pine Valley, Brookline--were founded by businessmen who wanted to establish an inner circle of corporate chieftains and other power brokers. And getting in can be as monumentally hard as being accepted into an elite clique in high school. Bill Gates, the richest man in the world, spent years trying to get into Augusta--and was kept out (until last year) because he had the audacity to say he wanted in.

As an avid golfer, I wanted to explore this world. It is, not surprisingly, a world that does not welcome journalists. One of the rules taken most seriously in private clubs is that members must not talk about the membership. Even friendship doesn't help. So wary are members about revealing secrets that before I asked a single question, two longtime golf partners of mine who are influential in business circles stopped talking to me.

I might never have gotten a word out of anybody for this story had it not been for one odd fact: I know Nordy the caddy. Now, I do not know Nordy's last name or much else about him except that he was my caddy last summer during a round at Cypress Point, one of the country's most exclusive--and beautiful--clubs. Nordy has no idea, but it wasn't until I uttered his name that most CEOs lowered their guard. Traveling from New York to California to South Carolina, I spoke with more than three dozen executives, investment bankers, and venture capitalists who belong to the nation's most private clubs. These included a dozen FORTUNE 500 CEOs and seven billionaires. My Nordy bona fides notwithstanding, most club-trotting CEOs were extremely reluctant to speak about a host of subjects: what clubs they belong to, how memberships are granted, with whom they like to play, or even what they love about the game.

The subject that clammed them up tightest was what they called the "Augusta issue." Talking about the fact that some exclusive clubs exclude women as members--Augusta National, in particular--was akin to a Sopranos family capo talking to the feds.

Still, the subject is hard to avoid--especially now, when thousands will flock to Augusta's lush fairways to watch the four-day Masters tournament. (It begins April 10.) Augusta, after all, is more than a private club in the way that golf is more than a game. It represents the pinnacle of success in business as well as the greatest trophy in golf. FORTUNE 500 companies IBM, GE, American Express, AT&T, and Lucent Technologies appear to have "unofficial" corporate memberships at Augusta for their chairmen and CEOs. (Augusta's 300 members include current and retired executives from Bank of America, Chase Manhattan, ChevronTexaco, Coca-Cola, Alltel, Honeywell, Caterpillar, and United Airlines as well.)

Yet Pat Russo, chairwoman of Lucent, can't get a coveted green jacket--despite her impressive handicap, reportedly in the low teens. (Russo wouldn't comment for this story.) And if so-called CEO courses Augusta and Pine Valley are where America's business relationships are born and nurtured, then Russo is handicapped indeed, critics say. Some CEOs confide that the issue is a serious one and worthy of discussion--but good luck getting them to say that above a whisper. It's not that they fear being branded "progressive," but worse: indiscreet. Witness what happened to Sandy Weill, who released a statement saying he supporting admitting women to Augusta. It was as if he'd violated the omerta--bringing a very private debate into a very public forum. A coterie of members began a quiet campaign to expel him. Said one angry Augustan: "Sandy Weill can make another $67 billion, but he'll never be truly accepted at Augusta."

As the Boeing business jet lifts off the tarmac in Fort Lauderdale and begins the ride to Ireland, host Wayne Huizenga uncorks the first bottle of cabernet. The porterhouse steaks are already sizzling. On the flight is a hodgepodge of Huizenga's friends and business associates--two executives from Bank of America, the retired quarterback Dan Marino, and actors Michael Douglas and Catherine Zeta-Jones. Shortly after dinner, a steward offers doses of sleeping pills.

The plane is silent for the next six hours until a few minutes before it lands in Dublin. Huizenga, the founder of Blockbuster and owner of the Miami Dolphins and Florida Marlins, tells everyone to put on their golf shoes. Two helicopters, only yards from the jet, are waiting to take the group to an oceanfront course known as Portmarnock that caters to a largely American business crowd. Indeed, a bunch of American CEOs already on the course are annoyed by the roar of Huizenga's choppers. "HOYZZennga," says the CEO of a well-known financial services company, "is like Rodney Dangerfield in Caddyshack."

Huizenga and company hardly notice the rolling eyes. He is accustomed to people who say that just because he has money does not mean he can be accepted. He doesn't care. Later, after a round in which he won a few dollars, he could be seen leading his group in a chorus of "Rose of Tralee" at the bar in the Butler Arms hotel in Waterville.

For Huizenga, golf is about camaraderie, not the game. For others, it is about the game, not camaraderie. But adherents to both philosophies will tell you stridently that it isn't "about business."

Eric Gleacher is in the golf-for-golf's-sake crowd. Once head of mergers and acquisitions at Morgan Stanley, he has collaborated on some of the biggest deals in history, including KKR's leveraged buyout of RJR Nabisco. Gleacher, now chairman of his own firm, is also a scratch golfer who has won club championships at National, Deepdale, Maidstone, and Shinnecock. Jack Welch and Scott McNealy, at one time the two best golfers in the FORTUNE 500, have gone head-to-head--not to do a deal but to see who is really the better player. (Welch, it turns out.) Phil Purcell and Chris Galvin played together at Pebble Beach and are also members of the Business Council and Augusta National. Yet Morgan Stanley is not the lead banker on Motorola deals.

This is not to say these relationships don't frequently morph into something with a dollar sign attached. Members of Cypress Point often bring top clients to play. At Augusta, it is rumored that one member, a local stockbroker, has a thick book of business thanks to his contacts at the club. Welch put McNealy onto GE's board of directors after they became golf buddies. Welch, in fact, made golf seem like a prerequisite for corporate success. While looking for a successor at GE, he hosted candidates at Augusta to see how they handled themselves. Similarly, in a more heated succession race at Merrill Lynch, board member Robert Luciano played on numerous occasions with would-be CEOs. During those trips, he developed a friendship with Stan O'Neal and eventually began soliciting the executive's advice for redirecting Merrill. When it came time to vote on a new president and heir to David Komansky, Luciano threw his weight behind O'Neal. Even Gleacher met his business partner, Sir Peter Burt, during a round at Muirfield in Scotland.

We are in a gargantuan home overlooking Pebble Beach, eating oysters topped with melted goat cheese that have been prepared by a private chef. My host, former Bank One CEO John McCoy, owns the house. He has invited three men--a golf pro, a real estate developer, and an investment manager--and their wives for cocktails and dinner. The CEO of Cardinal Health, Bob Walter, was here too but left early to dine with some folks from 3M. The wives remain in an adjacent parlor decorated with light colors and comfy couches, while the men sit around a raging fire.

"What is it about golf that CEOs love?" I ask.

"Relationships, building friendships, the camaraderie," replies my host, who is a member at Muirfield Village, Cypress Point, and Seminole. "What other way can a fat old man get around outside?"

Chimes in the developer: "On the course, we share an experience. Afterward, we know something about each other. I know if you play by the rules. We can trust each other."

Trust is the essential element of executive golf relationships--trust that a playing partner will be discreet, trust that business is not the motive, trust that the rules will be followed. The investor Ken Langone, one of the founders of Home Depot, recalls playing in a club tournament in California when he noticed that his partner's ball had moved. Not a slight rotation, but a good old-fashioned "foot wedge" to the left out of an ugly lie.

"I couldn't believe it," he recalls. "He had no honor. This was a tournament. We were partners, so it didn't hurt me. But he acted with total disregard for the rules of the game. I decided right at that moment that there was no way I was going to let us win." He pauses, then adds, "And there was no way I would ever do business with his company again."

For some, golf is a litmus test for a person's character. The executive recruiter Gerry Roche--whose chance encounter with Lou Gerstner during a lightning storm helped convince him that the then-CEO of RJR would be perfect at IBM--complains about golfers who step in his way before a shot and talk incessantly. Knight-Ridder chairman Tony Ridder, a former caddy, says, "You see how people react when they're not playing well." Often, they blame the caddy.

The deep insights into character. The fellowship with the movers and shakers. The abiding trust. If only wealthy executives could get that, plus the trappings of exclusivity, without the adolescent hazing of the country's venerable golf clubs. Ah, that's where Kiawah comes in. All you need to join the Kiawah Island Club outside Charleston, S.C., is money.

Days after being with McCoy, I am again eating oysters. This time I am shucking them myself and downing them with the help of a saltine. I have agreed not to tell who is with me--only that many are from the largest companies in the world and that the person next to me is worth an estimated $4 million-plus, owns a vacation home valued above $2 million, and paid up to $135,000 to join Kiawah, a sumptuous club hidden behind three security gates.

The timeless two-story structure, which is really less than eight years old, is furnished in 18th-and 19th-century antiques and overlooks an endless stretch of undeveloped marshland. Rooms are filled with gilded mirrors, armchairs made of walnut and mahogany, and Persian and Afghan rugs. Normally, the place is as quiet as a library. Just now, however, the cathedral-ceilinged dining room is packed with 250 men and women and a blues singer who is howling: "I want a big fat woman." A couple in their late 50s jump out in front of the crowd and start dancing. Other club members, dressed in jeans for the club's one casual event a year, chant in a chorus, "Big fat woman. Big fat woman."

A less populist alternative to golf-club hazing is to create your own gilded playground. Call it do-it-yourself exclusivity. That's what Wayne Huizenga, who belongs to dozens of clubs but is unlikely ever to be a member of Augusta, has done. Some years ago he bought about 2,000 acres north of Palm Beach and hired the pro Gary Player to build a course. There was no budget. The result is The Floridian, perhaps the most private club in the country. It has 70 slips for yachts, a landing pad for helicopters, and a 50,000-square-foot clubhouse. On a busy day, perhaps two dozen guests of Huizenga's will be playing. Scott McNealy and Larry Bossidy, formerly of Honeywell, are regulars. The Floridian, however, has only one member: Huizenga.

The members of the Augusta National Golf Club haven't noticed that there is any competition. Located opposite a noisy boulevard of strip malls, cheap motels and restaurants, Augusta doesn't look like much from the outside. With a right turn off Washington Road, a van carrying a member passes through a gate and drives up Magnolia Lane toward Founders Circle and the stately clubhouse. A porter is waiting on the curb. He greets the member by name, unloads his bags, and directs him to the pro shop. A few dozen other members are already on the grounds.

It is three weeks before the Masters, and well over 100 club members will soon be competing in a tournament of their own--the annual Jamboree, a team championship won last year by Bossidy and Jim Robinson, the onetime CEO of American Express. Both men are on the practice range, preparing to defend their title. After a quick lunch of fried chicken and biscuits, the member heads out to the first tee for a quick round in a group not far from where Bill Gates is playing. The course, beginning high on a hill and descending toward the famous Rae's Creek, looks like green velvet.

The next afternoon, after play is complete, the members--all wearing green jackets--gather for drinks on the lawn before stepping inside for dinner. They're talking about how they played that day and about little stuff--kids and college, the stock market. One member has been sharing his plans to improve the chicken sandwich at this year's Masters and how the pimento cheese sandwiches will not be changed. Bill Gates actually looks interested in this conversation. The men soon enter the dining room and take seats along rows of tables. For the rest of the night they make toasts, laugh, and view a series of skits filmed throughout the year that feature various members mocking themselves.

For the record, barely a word on this jovial Friday evening is said about the "Augusta issue."

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