A board of directors is a set of people who are accountable for management, control and direction of an organization. They oversee the legal responsibilities of a business and are held to a strict standard of accountability. If they fail to meet their fiduciary duties and obligations, they could be personally liable.
A group of individuals who advise and guide the company is called an advisory board. The advice they offer is more direct and their focus tends to be on growth, development and strategy, not reporting governance, governance, risk management and avoiding risk of downside.
Ideally, a company should lay out clear guidelines regarding the role of their advisory board – not only in official documentation like meeting minutes, but also in daily communication to avoid confusion. This will help ensure that they do not accidentally cross into the territory of being a board of directors, which could be a serious legal issue for members if they’re not meeting their fiduciary obligations.
The distinction can get somewhat blurred in the real world, with organisations sometimes referring to their advisory boards as “the board.” It’s a good idea to put this in writing, both for the sake of clarity and to avoid any mistaken assumptions. A formal written statement that defines the role of an advisory board will help to minimise the risk of confusion for the people involved. It is particularly helpful when members of the advisory committee may be members of a board of directors, or are new to the organization.
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