A board of directors is an organisation comprised of individuals who are responsible for the governance, control, and direction of that organisation. They are responsible for the legal obligations and accountability of a business. This means that if they don’t perform their fiduciary duties, they can be personally accountable.
An advisory board, on the other hand, is a group of people who provide guidance and mentorship on how a company should run. The advice they give is more direct, and their focus is on growth, development and strategy, not reporting and governance, reducing risk and avoiding risk that could be detrimental to the business.
Ideally, a company should establish clear guidelines for the work of their advisory committee – not just in official documents like meeting minutes but also in all communication with the board to avoid confusion. This will ensure that they don’t accidentally get into the realm of a board of director, which could have serious legal implications in the event they fail to perform their fiduciary obligation.
This distinction is a bit ambiguous in real life and some organizations refer to their advisory boards as “the board.” It’s effective board member a good idea to put this in writing in the interest of clarity and to avoid any mistaken assumptions. A formal written declaration that defines the role of an advisory board could aid in reducing confusion among those involved. This is especially useful when members of the board were previously part of a board or are new to the organisation.
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