Harrison's Artisan Florist

A board of directors and an advisory board are two distinct entities that have distinct roles. often, there is confusion around the distinctions. This is partly because some companies employ the terms interchangeably and also the word “board” is a word with many meanings in the business world. This can be compounded by not defining the function of the advisory board in writing, either through a resolution of the board or bylaws.

It is essential to make an explicit distinction between your advisory board and your board of directors. This will allow you to avoid confusion when you are working with people who might not be legally able to serve as directors, such as teachers who establish micro-schools, or seasoned entrepreneurs with no personal stakes. This is important as a legal board of directors will have responsibilities, risks and liabilities that an advisory board doesn’t have.

A advisory board for the CEO and management is an advisory board. It offers them advice and connections that they might not otherwise have. Typically advisory boards aren’t shareholders or investors in the company and they do effective board member not hold an interest in voting.

It is also important to note that, even though they might have experience in certain areas an advisory board will not have the power to make decisions for the organization. This is because the management team and CEO are accountable for making decisions not the advisory board. The only way for an advisory board to be granted the power to direct the organisation is if they are given official board committee status, with voting rights and liability protections by Deeds of Indemnity, Access and Directors and Officers Insurance.

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