Board of Directors Vs Advisory Board

A board of directors is a group of individuals who are responsible for the oversight, control and governance of an organization. They are accountable for the legal responsibilities and accountability of a company. This means that if they fail comply with their fiduciary obligations they may be personally accountable.

A group of individuals who mentor and advise a business is called an advisory board. Their advice is more practical, and their focus tends to be on development, growth and strategy, not reporting and governance, reducing risk and avoiding downside risk.

Idealy, an organization should clearly define the purpose of its advisory board in all official documentation like meeting minutes and in communications via verbal to avoid confusion. This will ensure that they do not accidentally cross over into the territory of a director’s board and could result in serious legal consequences if they fail to meet their fiduciary responsibilities.

In practice, the distinction is often blurred and companies may refer to their advisory board as «the Board.» It is worthwhile making it clear in writing to avoid any confusion or accidental mistakes. A formal written declaration that clarifies the role www.theirboard.com/what-it-takes-to-be-an-effective-board-member/ of an advisory board could assist in reducing confusion among the people involved. This is especially helpful when board members have previously been part of a board or are new to the organisation.