A board of directors and an advisory board are two different entities with distinct roles, and often, there is confusion around the distinctions. This is in part due to the fact some companies employ the terms interchangeably and also the word “board” is a word that has many connotations within the business world. This can be further exacerbated by not writing down the function of the advisory council whether through a bylaw or resolutions of the board.
It is crucial to establish an obvious distinction between your advisory board and your board of directors. This will allow you to avoid confusion when working with people that may not be legally able to serve as directors, for example, teachers who create micro-schools, or seasoned entrepreneurs with only a small stake in the business. This is crucial because an official board of directors carries responsibilities, risks and liabilities that an advisory board doesn’t have.
A advisory board for the CEO and management is known as an advisory board. It gives them suggestions and www.theirboard.com/tips-for-hosting-a-successful-virtual-event/ connections that they wouldn’t otherwise have. Typically, advisory boards are not shareholders or shareholders in the company, and do not hold any voting rights.
A advisory board, regardless of their expertise in certain fields, does not have the ability or authority to direct an organisation. This is because the management team and the CEO are the ones who make decisions and not the advisory board. The only way for an advisory board to be granted the authority to direct the company is if they are granted official board committee status, with voting rights and protection from liability through Deeds of Indemnity, Access and Directors and Officers Insurance.