Boards of directors and advisory boards can help an organization to reach new heights. But their main difference lies in the legal responsibilities they have. An advisory board can be a useful tool for nonprofits to communicate to the community and offer their ideas and perspectives.
An advisory board does not have the same legal obligations and fiduciary obligations as a regular board of directors, meaning that they are not able to make financial decisions on behalf of an company. This is the reason it’s crucial to ensure that both the advisory board as well as the board of directors are aware of the role of an advisory board and the limits of their role.
This is especially important in the case of organizations that refer to both groups as the “board.” By providing a written explanation of what an advisory board’s role is – through a board resolution, for example – you can make sure that members of the advisory board don’t accidentally begin acting as a board directors. This can be a major issue not just due to the liability issue, but also because it can cause confusion and frustration between the advisory board members and the board.
An excellent advisory board is an excellent resource for a nonprofit, and it is crucial that everyone involved understands what their role in the organization. By making sure there’s the distinction between an advisory board and a regular board, organizations can reduce the chance of confusion, avoid mistakes, and retain the best talented employees.