Board of Directors Vs Advisory Board

A board of directors is a set of individuals responsible for oversight, control and governance of an organization. They are responsible for the legal responsibilities and accountability of a company. If they fail to perform their fiduciary duties they could be personally accountable.

An advisory board, on the other hand, is a group of individuals who offer guidance and mentorship on how a company should be run. The advice they offer is more practical, and their focus tends to be on development, growth and strategy, as opposed to reporting, governance, risk management and avoiding risk of downside.

In the ideal scenario, an organization should outline specific guidelines for the duties of their advisory board – not only in official documentation like meeting minutes but also in all communication with the board to avoid confusion. This will help ensure that they do not accidentally cross into the territory of being a board of directors, which can be a serious legal issue for members if they are not fulfilling their fiduciary obligations.

In practice, the distinction may be blurred and companies may refer to their advisory board as “the Board.” It is worth putting it in writing to avoid confusion or accidental mistakes. A formal written document that clarifies the role of board of directors vs advisory board an advisory committee can help to minimise confusion among the people involved. This is particularly helpful when board members were previously part of the board or have just joined to the company.