Boards of directors are crucial to the performance of an organization, but they have some important differences. According to a recent piece by board expert Marissa Levin the main difference between a board of directors and an advisory board is that a board is bound by fiduciary responsibilities, whereas advisory boards do not. This makes a board legally accountable for any action they take and implies that they must consider the impact of their decisions on a company’s financial bottom line.

While boards do not have fiduciary responsibilities It is nevertheless important for an organization that they carefully consider the impact of their recommendations prior to they implement them. If a CEO accepts any recommendation of an advisory board and it proves to be detrimental to business, the members of that advisory board may be accused of negligence.

To avoid www.theirboard.com/whats-the-difference-between-the-board-of-directors-and-an-advisory-board/ this, businesses must ensure that their advisory committee has a clearly defined its role via a resolution of the board or any other document before they begin recruiting members. Alternatively, it’s possible to state clearly that the advisory board is not a legally-constituted board of directors and doesn’t have any responsibility under the company’s bylaws or by obtaining a written explanation from the CEO.

It’s also smart for a company to establish an evaluation policy for its advisory board that outlines objectives and the scope of the assessment. Establishing clear guidelines and objectives will help ensure that a board gets the most value from its members, regardless of whether it’s a regular board or an advisory board.