Board of Directors Vs Advisory Board

A board of directors is a group of individuals who are responsible for the management, control, and direction of that organization. They are accountable for the legal obligations of a company and are held to a high level of accountability. If they fail to fulfill their fiduciary duties they could be personally accountable.

A group of individuals who advise and guide a company is an advisory board. The advice they provide is more direct and their focus is on development, growth and strategy, not reporting governance, governance, risk management and avoiding risk of downside.

In the ideal scenario, an organization should lay out specific guidelines for the duties of their advisory board not just in official documents like meeting minutes, but also in daily communication to avoid confusion. This will ensure that they don’t accidentally cross over into the territory of a board of director and have grave legal consequences if they fail to meet their fiduciary obligations.

This distinction can be a bit ambiguous in real life in some instances, where organizations refer to their advisory boards as “the board.” It’s important this post to write this in writing in order to have a sense of clarity and to avoid any mistakes that could be made. A formal written document that defines the function of an advisory board can reduce confusion among those involved. This is especially useful when members of the board were previously part of a board or are new to the organization.