Andréa Sumé

Board of Directors Vs Advisory Board

It is common for people to confuse the distinction between an advisory board and a board of directors particularly if they are not well-versed in the subject. The confusion can stem from common terminology (referring to both as “the board”), the lack of a clear and documented explanation of the function of the advisory committee within the company’s bylaws or rules and a different degree of fiduciary responsibilities.

A board of directors is the institution’s governing body and has the power to take a vote on major decisions, including replacing the CEO or making changes to the executive management team. They also have the power to hold management accountable for their actions. Board members are bound by a fiduciary duty to the company, and could be held liable if they fail to meet the requirements of this standard.

Advisory boards provide guidance to the company and its leaders. They may be able to recommend specific projects or changes however it is up to the leadership of the company to accept or reject the advice.

An advisory board is made up of third parties who have experience and have a wealth of industry information. Those who play an advisory role can help the business in keeping abreast of the trends and making recommendations to help the business expand. It could be as easy as streamlining customer service in line with the latest buying patterns or as complex as creating an entirely new strategy for global expansion.

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