It is commonplace for people to confuse the difference between an advisory board and a board of directors especially if they’re unfamiliar with the distinction. The confusion could be caused by common terminology (both boards are called “the board”), the absence of clear documentation regarding the function of an advisory board in a bylaws or rules of the company and a distinction in fiduciary responsibilities.
A board of directors is the governing body of an organization and has the authority to make major decisions, such as replacing the CEO or making changes to the executive management team. It is also able to make management accountable for its actions. Board members are held to a fiduciary responsibility to the company and may be held accountable in the event that they fail to fulfill the standards.
Advisory boards provide advice to the leaders of the business. They may be able recommend specific changes or projects, but it is ultimately up to the top management of the company to either follow the advice or not.
An advisory board is composed of people who are experts and have extensive industry knowledge. The members who play an advisory role are able to assist the business in staying abreast of the latest trends, and offer suggestions that can help the company expand. This could be as simple as streamlining customer service based on recent buying behavior or as complex as the creation of an entirely new strategy for global growth.
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