Board of Directors Vs Advisory Board

It is commonplace for people to misunderstand the difference between a advisory board and a board of directors particularly if they are unfamiliar with the distinction. The confusion can result from common terms (both boards are known as “the board”) and the absence of clear documentation about the responsibilities of an advisory board in the regulations or bylaws of the company and a different approach to the fiduciary duties.

A board of director is the governing body for an organization. It is empowered to make major decisions, such as the replacement of the CEO or the changes in the executive management. It is also able to make the management accountable for their actions. Board members are bound by a fiduciary obligation to the company and may be held accountable if they fail to meet this standard.

Advisory boards offer advice to the business and its leaders. They might be able to recommend specific projects or changes but ultimately it’s the decision of the business’s leadership the business to follow the advice or not.

A typical advisory board is composed of third parties who are experienced and have extensive industry expertise. Those who play an advisory role can assist the company in keeping up-to-date with the latest trends and make suggestions that will help it expand. This can be as simple as improving customer service based on the latest buying patterns or as complicated as establishing the new strategy to support global growth.

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