Board of Directors Vs Advisory Board

https://theirboard.com/what-it-takes-to-be-an-effective-board-member/

A company’s advisory boards can help in meeting business needs and developing long-term strategies. Effective advisory board members are highly experienced individuals who can bring their expertise to your business and offer advice leaders. They are experts in your field and have background in professional realms such as law, finance or marketing. Often advisory boards are comprised of volunteers who wish to support your company. They may be current members of the board of directors or they could be recruits from outside. They meet regularly, or frequently. Most often, they meet between six and eight times a year. They may be a mentor for the CEO and leadership.

The majority of members of an advisory council aren’t paid for their time but they are reimbursed for expenses related to meetings. In addition the size of an advisory board is flexible, which makes it easier to form and expand based on the company’s needs. A regular board of directors is more formal than an advisory board, which helps reduce risks of liability.

It’s crucial that a company set clear guidelines for their advisory board to ensure that members don’t start acting like directors on a board and assume all the associated liabilities. This can be done by writing a formal explanation of the advisory board’s duties, such as through a board resolution or in their bylaws. This will allow them to make them accountable and reduce confusion. As a company expands advisory roles are usually formalized and become a full-fledged board of directors. This typically happens when the acquisition of investors or reaching a certain scale in operations.