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What is a Board of Advisors?

An advisory board can be a great tool for a small company.
A board of advisors is a group of people who meet periodically to offer suggestions and direction to a company.
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  • Written By: Mary McMahon
  • Edited By: Bronwyn Harris
  • Last Modified Date: 15 August 2014
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A board of advisors is a small group of people which meets periodically to offer advice and direction to a company. Members of the board do not usually have a share in the company, and they do not bear legal responsibilities for the company's actions. Generally, small and startup firms use a board of advisors so that they get a firm footing in their market, and people on the board are chosen on the base of expertise and prestige.

It can be easy to confuse a board of advisors and a board of directors, since to the uninitiated these two groups may sound the same. However, a board of directors is a group of officials who are elected by shareholders to oversee the company's operations, in contrast with people who are selected by the company. Members of a board of directors do bear legal responsibility for the events which occur on their watch, and they are compensated in stock or cash for their work.

Some people may also use the term “board of advisors” to refer generally to a group of professionals convened to offer advice and assistance with a project. Universities, for example, might have boards of advisors to guide them on sensitive issues, and such boards might also assist research teams and other groups. In this case, members of the board are chosen for their expertise and reputation in the field, to ensure that the project is carried out in a professional and ethical manner.

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An advisory board can be a great tool for a small company, especially as it expands and its operations start to go beyond the reach and knowledge of the company's officers. Since the members of the board do not hold any power, they cannot make decisions for the company, but they can offer useful suggestions based upon research and experience. The size of such a board may vary, but three to 10 people is common, ensuring a broad spectrum of views and experience.

Once a company is incorporated, a board of directors must be established to satisfy stockholders. However, a company can choose to retain a board of advisors as well, or to integrate members from the advisory group to the board of directors. Many small companies find the work of such a board extremely useful, because members can spot potential problems, offer suggestions for improvement, and act as consultants on new projects.

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Discuss this Article

ysmina
Post 2

I think that especially for a non profit, a board of advisors is very important. My friend had started a non profit several years ago and if she hadn't taken the steps to put together a great board of advisors, it would have been difficult for her to get the necessary expertise to get the organization moving. The Board can also help locate new funding sources, and non profits are always in need of more funding.

ddljohn
Post 1

I've attended many Board of Advisors meetings and know that although the board doesn't have legal responsibilities like the Board of Directors, they do carry certain duties towards the organization. Some board responsibilities include attending and contributing to meetings, full knowledge of issues and agenda of the organization, participation in board functions and events and adherence to any laws relating to board members.

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