What Is an Advisory Board?

Advisory Board / Advisory Boards

An advisory board comprises a group of expert individuals handpicked to guide a company’s board of directors. Setting up an advisory board is optional but can prove to be a valuable resource. The board of advisors is a structured and strategic means for shareholders and directors to engage with thought leaders outside their organisation.

Composition of an advisory board

Advisory board members are chosen precisely for their expertise in a special field or industry to help companies fill in critical knowledge gaps. Here is how companies form advisory boards:

  • Selection of members

Advisory board members are sometimes paid, but can also be volunteers, and are invited by the board of directors to help them carry out their roles more efficiently. They are respected thought leaders in their field.

  • Types of expertise

The advisory board members are selected for their proficiency in different fields, including cybersecurity, law, finance, compliance, marketing and human resources.

  • Members included

The board of advisors typically includes an independent chair, external advisors and, in some cases, internal business representatives, such as directors, management or other stakeholders.

Functions of an advisory board

Advisory boards are established to help a company gain insight into important matters. Their primary functions include:

  • Resolving complex business problems and helping companies overcome major crises
  • Assisting a company going through a major transition
  • Helping company executives explore new opportunities with thought-provoking viewpoints
  • Providing the latest knowledge and critical thinking on a specific industry or field to facilitate decision-making

Difference between an advisory board and a board of directors

A board of directors is accountable for the direction, management and governance of a company. An advisory board is an informal committee without any legal responsibilities.

The board of directors can make decisions, cast votes and create policies whereas an advisory board can only offer advice. The former has no legal power to make changes in the way that a board of directors can. 

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