A board of directors is an organisation of individuals who are responsible for the management, control and direction of the organization. They are accountable for the legal obligations of a company and are held to a high standard of accountability. If they fail to perform their fiduciary duties, they may be personally held accountable.

A group of individuals who mentor and advise companies is known as an advisory board. The advice they offer is more practical, and their focus is on development, growth and strategy, instead of reporting, governance, risk management and avoiding downside risk.

Ideally, an organisation should set out clear guidelines for the work of their advisory committee – not just in official documents such as meeting minutes, but also in everyday verbal communication to avoid confusion. This will ensure that they do not accidentally cross into the realm of a board of directors, which could have serious legal consequences for members if they are not meeting their fiduciary obligations.

The distinction can get somewhat unclear in practice as some companies refer to their advisory boards as “the board.” It’s important to write this in writing in the interest of clarity and to avoid any mistakes that could be made. A formal written statement that defines the purpose of an advisory board can help to minimize the risk of confusion for those involved. It is particularly useful for those whose members of the advisory board may have previously been part of an executive board or are new to an organisation.

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