Published On: 28 Eylül 2023285 words1.4 min read

Boards of directors and advisory boards play a crucial role in the success of an organization, but there are a few important differences between them. According to a recent article written by board expert Marissa Levin, the main distinction is that a boards of directors is obligated to be fiduciary while advisory boards do not. This means that a board of directors is legally accountable for the actions it takes, which means they have to weigh the effects of their decisions on the company’s bottom line.

However, even though a board of advisors don’t have fiduciary obligations, it’s essential for a company to consider the implications of their advice before taking it onboard. For example the case where a CEO chooses to take a decision based on a recommendation an advisory board has made and the decision is detrimental to the business, the members of the advisory board could be sued by the company for negligence.

To prevent this from happening, companies must ensure that their advisory boards are clearly defined in a written document, such as a resolution for the board prior to they are able to hire members. It is also possible to declare that an advisory board does not have any legal obligation and is not a board of directors in the company’s bylaws, or in a written explanation by the CEO.

It’s also beneficial for a company to establish an evaluation policy for its advisory board that outlines objectives and the scope of the assessment. It doesn’t matter if it’s an advisory board or a regular board of directors, setting clear guidelines and goals for an evaluation will ensure that the board gets the most value from its members.

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