Board of Directors Vs Advisory Board

https://theirboard.com/tips-for-hosting-a-successful-virtual-event/

Boards of directors play an important role in the success of an organization however, they do have some fundamental distinctions. 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 is bound by fiduciary obligations, while an advisory board doesn’t. This makes a board legally responsible for any actions it takes and entails that they have to weigh the effects of their decisions on the company’s financial bottom line.

Even though a board does not have a fiduciary obligation It is nevertheless important for an organization that they take into consideration the consequences of their suggestions prior to making them. For instance when a CEO decides to follow a suggestion 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 avoid this, organizations must ensure that their advisory board is provided with a clearly defined its responsibilities in a board resolution or other document prior to deciding to recruit members. It is also possible to state that advisory boards do not have any legal liability and is not a board of director in the company’s bylaws or a written explanation from the CEO.

It’s also smart for a business to have an evaluation policy for its advisory board, which includes objectives and the scope of the evaluation. Whether 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 maximum value from its members.