Boards of directors and advisory boards both are essential to the success of an organization, however there are some significant distinctions between them. According to a recent piece by board expert Marissa Levin the main difference between a board of www.theirboard.com/whats-the-difference-between-the-board-of-directors-and-an-advisory-board/ directors and an advisory board is that a board has fiduciary duties, while an advisory does not. A board of directors is legally accountable for the actions they take and must evaluate the effect of their decisions on the bottom line of a business.
Even though a board does not have fiduciary responsibility however, it is vital for an organization that they be aware of the implications of their recommendations before taking them into action. If a CEO follows the advice of an advisory board and the result is detrimental to the business, then the members of that advisory board may be accused of negligence.
To prevent this from happening, companies must ensure that their advisory boards are clearly defined in a written document, such as a board resolution prior to when they are able to hire members. Alternatively, it’s possible to declare that the advisory board is not a legally-constituted board of directors and doesn’t have any responsibility in the bylaws of the company or by obtaining a written explanation from the CEO.
It is also advisable for an organization to have guidelines for evaluation of its advisory board that outlines the goals and scope of the assessment. Whether it’s an advisory board or a regular board of directors, creating clear guidelines and objectives for an evaluation will ensure that the board gets the maximum value from its members.
