A board of directors is an organization composed of people who are responsible for the oversight, governance, and direction of that organization. They are accountable for the legal obligations and accountability of a company. If they fail to perform their fiduciary duties, they may be personally liable.
A group of people who advise and mentor a company is an advisory board. They offer more direct guidance and tend to concentrate on growth, strategy and development instead of reporting and risk management, governing and avoiding risks that could be detrimental to the business.
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Ideally, a company should clearly define the purpose of its advisory board in all official documentation like meeting minutes, as well as in communications via verbal to avoid confusion. This will help ensure that they don’t stray into the realm of a board of directors, which could have serious legal consequences for members if they are not performing their fiduciary duties.
The distinction can get somewhat unclear in practice, with organisations sometimes referring to their advisory boards as “the board.” It is important to put this in writing, both for the sake of clarity and to avoid any unintentional mistakes. A formal written declaration defining the purpose of an advisory board helps to reduce the chance of confusion for those involved. This is especially useful when members of the advisory panel may have been previously part of a board of directors, or are new to the organization.
