A board of directors is an organization composed of individuals who are accountable for the management, control and direction of the organisation. They are accountable for the legal obligations of a business and are held to a strict level of accountability. If they fail to meet their fiduciary obligations and obligations, they could be personally liable.
An advisory board, on the other hand, is a group of individuals who provide guidance and mentorship on how a company should be run. The advice they give is more direct and their focus is on development, growth and strategy, instead of reporting and governance, managing risk and avoiding downside risk.
Idealy, an organization should clearly define the purpose of its advisory board in all official documents like meeting minutes and in oral communications to avoid confusion. This will ensure that they don’t accidentally cross over into the realm of a board of directors, which can have serious legal consequences for members if they’re not performing their fiduciary duties.
This distinction can be somewhat unclear in practice, with organisations sometimes referring to their advisory boards as “the board.” It’s a good idea to put this in writing to ensure of clarity and to avoid mistaken assumptions. A formal written declaration defining the function of an advisory board can help to reduce the chance of confusion for those involved. This is particularly useful when members of the advisory board may be members of the board of directors or are new to the organization.
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