Board of Directors Vs Advisory Board

Boards of directors and advisory boards both play a vital role in an organization’s success, but there are some significant distinctions between them. According to a recent piece by board expert Marissa Levin the main difference between a board of director and an advisory board is that a board is bound by fiduciary obligations, while an advisory board doesn’t. This makes a board legally responsible for any actions it takes and entails that they have to weigh the effects of their decisions on a company’s financial bottom line.

However even though a board of advisors does not have fiduciary obligations, it’s critical for an organisation to consider the implications of their suggestions prior to deciding to take it onboard. For instance If a CEO decides to follow a recommendation that an advisory board has made, and the decision is detrimental to the business, then the members of the advisory board could be sued by the company for negligence.

To avoid this, businesses must ensure that their advisory board has clear written clarification of its role via an agreement with the board or another document before allowing members to join. It is also possible to state that advisory boards do not carry any legal responsibilities and is not a board of director in the company’s bylaws. Or, a written explanation from the CEO.

It’s also a good idea for an organization to have a policy of evaluation for its advisory board that outlines the goals and scope of the evaluation. Establishing clear guidelines and goals will ensure that the board gets the most value for its members, regardless of whether it’s a regular board or an advisory board.

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