Board of Directors Vs Advisory Board

Boards of directors are crucial to the success of any organization however, they do have some key differences. According to a recent article by board expert Marissa Levin the main difference between a board of director and an advisory board is that a board has fiduciary obligations, whereas advisory boards do not. A board of directors is legally responsible for all actions they take and must evaluate the effect of their decisions on the performance of a company.

While boards do not have fiduciary responsibilities It is nevertheless important for an organisation that they carefully consider the impact of their suggestions prior to they implement them. For example when a CEO decides to follow a recommendation that an advisory board has made, and the decision is detrimental to the company, the members of the advisory board could be sued by the company for negligence.

To prevent this from happening, companies must ensure that their advisory boards are clearly defined in a written document, such as a resolution of the board before they hire members. It is also possible to declare that advisory boards do not have any legal responsibility and is not a board of directors in read the article the company’s bylaws. Or, a written explanation provided by the CEO.

It’s also beneficial for a company to establish an evaluation policy for its advisory board that outlines objectives and the scope of the evaluation. It doesn’t matter if it’s an advisory board or a regular board of directors, creating clear guidelines and goals for evaluations will help to ensure that the board gets the maximum value from its members.

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