An advisory board for a company can assist in addressing business demands and establishing long-term strategies. Effective advisory board members are experts who are able to provide their expertise and guidance to your business. They are people who know the industry and have expertise in professional fields such as finance, law or marketing. Often, advisory boards are made up of volunteers who wish to support your company. They may be members of the board or recruiters from outside. They meet often or semi-regularly. They typically meet 6-8 times per year. They can also serve as mentors for the CEO and leadership team.
The majority of the members of an advisory board are not paid for their time, however they are reimbursed for expenses related to meetings. Moreover, the size of an advisory board can be adapted and makes it easy to establish and expand based on the needs of the company. A regular board of directors is more formal than an advisory board, which can help reduce risks of liability.
It is crucial for a business to define clear boundaries to ensure that their advisory committee does not begin acting as a board and assume all of the liabilities associated with it. This includes writing a documented explanation of the advisory boards’ role by way of the board resolution or their bylaws. This will make it easier to hold them accountable, and prevent confusion. As companies grow advisory roles are usually formalized and become a full-fledged board of directors. This change usually occurs when a business is acquired by investors or reaches the level of operation that it requires.
