The primary purpose of this study was to examine the demographic characteristics of Boards of Directors in the hospitality industry, and how those characteristics can impact a firm’s performance during a major crisis. More specifically, using the upper echelons perspective, this study examined the impact of financeoriented directors, and directors who were outsiders, on a company’s stock price during the great recession. Results using companies from the hospitality industry indicate that companies that had the highest percentage of finance-orientated directors tended to fall further and recover less quickly. Yet, in the aftermath of the crisis, companies that performed worse during the crisis tended to increase the percentage of finance-oriented directors. The authors of the study assert that extending the application of the blissful ignorance effect is a logical explanation for the behavior found in the results. © ۲۰۱۷ The Authors.

Introduction

How an organization performs during changes in its external environment can be critical to its success (Cho & Hambrick, 2006; Hambrick, 2007; Ocasio, 1997). This can be particularly true when companies experience a crisis (Goldberg & Petasnick, 2010). In the hospitality sector, for example, potential crises include: outbreaks of food-borne illnesses, rodent infestations, equipment breakdowns and supply disruptions. Perhaps most calamitous is when whole industries, or whole economies, are hit with a wide-spread crisis, such as a natural disaster or an economic collapse, that is defined as a high-impact event that threatens the organization’s viability and is characterized by ambiguity of cause and effect (Brandstrum, Bynander, & Hart, 2004; Pearson & Clair, 1998). Though wide-spread crises occur somewhat infrequently, they do present opportunities to examine how differing organizations perform while facing a similar scenario. As such, research on these larger events could shed light on how organizations perform during more local disasters. Inspired by a framework for crisis management by Smits and Ezzat (2003), which was itself influenced by the upper echelons perspective (Hambrick & Mason, 1984), the primary purpose of this paper was to examine the impact of finance-oriented directors on a company’s ability to successfully manage a major crisis. Post hoc tests were then used to explore any significant changes in the percentage of finance-oriented individuals on the BODs during a major crisis. Finally, the author(s) of this study assert that the combination of the results from the primary, and ad hoc analysis, are best explained by extending the managerial application of the concept called “blissful ignorance”.