A board of directors is a group of people who are accountable for oversight, control and governance of an organisation. They are accountable for the legal obligations of a company and are held to a high standard of accountability. This means that if they fail to perform their fiduciary duties they may be personally accountable.
An advisory board is, in contrast is a group of people who provide guidance and mentorship on how a company should be run. Their advice is more direct, and their focus tends to be on growth, development and strategy, as opposed to reporting governance, governance, risk management and avoiding downside risk.
Ideally, a company should outline clear guidelines regarding the role of their advisory boards – not only in official documentation such as meeting minutes, but also in everyday verbal communication to avoid confusion. This will ensure that they do not accidentally enter into the territory of a board of director and could result in serious legal consequences if they fail to meet their fiduciary obligations.
In the real world, this distinction can this post be blurred, and organizations may refer to their advisory board as “the Board.” It is recommended putting it in writing to avoid any confusion or accidental mistakes. A formal written statement that defines the role of an advisory board can help to avoid confusion for those involved. It is especially useful when members of the advisory panel may have previously been part of a board of directors or are new to the company.