Board of Directors Vs Advisory Board

07/12/2024 Email Marketing

A board of directors is a group of individuals responsible for supervision, governance, and control of an organization. They are accountable for the legal obligations and accountability of a company. This means that if they fail perform their fiduciary duties they could be personally accountable.

An advisory board, on the other hand, is a group of people who offer guidance and mentorship on how a business should run. They provide more practical advice and tend to focus on strategy, growth and development instead of reporting, risk management, governance and avoiding risks that could be detrimental to the business.

Ideally, a company should clearly define the purpose of its advisory board in all official documents like meeting minutes and in oral communications to avoid confusion. This will ensure that they do not accidentally cross-check into the jurisdiction of a board of directors and have grave legal implications if they fail to meet their fiduciary obligation.

In practice, the distinction can be blurred, and companies may refer to their advisory board as “the Board.” It is worthwhile creating a formal statement to avoid confusion or accidental mistakes. A formal statement that clarifies the role of an advisory committee can aid in reducing confusion among those involved. This is especially useful when board members have previously been part of a board or are new to the organisation.

https://theirboard.com/corporate-decision-making-reimagined-with-virtual-board-rooms/