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 oversee the legal responsibilities of a company and are held to a high standard of accountability. This means that if they don’t meet their fiduciary duty, they can be personally held accountable.

An advisory board however, is a group of people who provide guidance and mentorship Virtual Data Rooms on how a business should run. The advice they offer is more direct and their focus tends to be on development, growth and strategy, rather than reporting governance, governance, risk management and avoiding risk of downside.

Ideally, a company should outline clear guidelines for the role of their advisory committee – not only in official documentation such as meeting minutes, but also in everyday verbal communication to avoid confusion. This will ensure that they do not accidentally cross-check into the jurisdiction of a director’s board, which could have serious legal implications should they fail to comply with their fiduciary responsibilities.

In practice, the distinction may be blurred and some organizations refer to their advisory board as “the Board.” It is recommended creating a formal statement to avoid confusion and accidental mistakes. A formal written document that defines the function of an advisory committee can assist in reducing confusion among those involved. This is particularly helpful when members of the board have been previously on a board or are new to the company.