Boards of directors play a significant role in the success of an organisation However, they have a few fundamental distinctions. According to a recent article written by board expert Marissa Levin, the main difference is that a board of directors has fiduciary obligations while an advisory board doesn’t. A board of directors is legally responsible for the actions they take and must evaluate the effect of those decisions on the financial bottom line of a company.
However while a board of advisors don’t have fiduciary obligations, it’s vital for an organization to evaluate the potential impact of their advice before taking it into consideration. If a CEO accepts a recommendation made by an advisory board, and it is detrimental to the business, then the members of the advisory board may be accused of negligence.
To avoid this, companies should ensure that their advisory board is provided with a clarified in writing its role https://theirboard.com/whats-the-difference-between-the-board-of-directors-and-an-advisory-board/ in a resolution of the board or any other document before they recruit members. It is also possible to state that advisory boards do not have any legal responsibility and is not a board of directors under the company’s bylaws or a written explanation from the CEO.
It is also advisable for an organization to have a policy of evaluation for its advisory board, which outlines the objectives and scope of the evaluation. It doesn’t matter if it’s an advisory board or a regular board of directors, setting clear guidelines and goals for evaluations will help to ensure that the board receives the most value from its members.
