Board of Directors Vs Advisory Board

The advisory board’s presence can help your business meet business needs and develop long-term strategies. Effective advisory board members are highly experienced who can contribute their knowledge to your company and provide leaders. These are individuals who understand your industry and have a background in professional realms such as finance, law or marketing. Advisory boards are typically composed of volunteers who want to help you. They could be current board of directors members or they could be recruited by external sources. They meet frequently or semi-regularly. Typically, they meet 6-8 times per year. They can be mentors for the CEO and the leadership team.

Typically, the members of an advisory board aren’t compensated for their time, but they are reimbursed for expenses related to meetings. Moreover the size of an advisory board can be adapted and makes it easy to form and expand based on the needs of the company. A regular board of directors is more formal than an advisory board, which can help reduce risks of liability.

It is important for companies to set clear boundaries https://theirboard.com/whats-the-difference-between-the-board-of-directors-and-an-advisory-board/ so that their advisory committee does not become an advisory board and take on all of the liabilities associated with it. This is why it’s important to write a documented clarification of the advisory board’s duties, such as through the board resolution or their bylaws. This will allow them to make them accountable and reduce confusion. As a company grows it’s not uncommon for advisory roles to become more formalized, and eventually transform into full board of directors. This change typically coincides with the acquisition of investors or reaching a certain amount in its operations.