A board of directors is a group composed of people who are responsible for the governance, control and direction of the organisation. They are responsible for the legal obligations and accountability of the company. If they fail to fulfill their fiduciary duties they could be personally responsible.
An advisory board, on the other hand, is a group of individuals who offer advice and mentorship on how a company should be run. Their advice is more hands-on, and their focus is on development, growth and strategy, instead of reporting, governance, risk management and avoiding risk that could be detrimental to the business.
Ideally, a company should outline clear guidelines for the role 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 ensure that they don’t stray into the realm of a board of directors, which can have serious legal consequences for members if they’re not fulfilling their fiduciary obligations.
This distinction is a bit blurred in practice and some organizations refer to their advisory boards as “the board.” It’s important to write this in writing in the interest internet theirboard.com/document-management-systems-key-to-efficient-digital-data-spaces/ of clarity and to avoid any unintentional mistakes. A formal written document that defines the function of an advisory board could reduce confusion among those involved. This is especially beneficial when board members were previously part of the board or have just joined to the company.
