Both the Advisory Board and the Board of Directors play crucial roles in the operations of a successful company. Each board has its own characteristics and fulfills a distinct organizational role. Here’s an overview of the differences between the two:

Definition

Advisory Board: Comprised of individuals or experts with experience in one or more areas related to the organization’s business operations. Their main function is to provide specialized advice and strategy to the organization they serve. However, they do not engage in the day-to-day activities of the organization.

Board of Directors: A formal governing body, usually established by shareholders or other relevant parties, to oversee and manage the operations of a company, ensuring they run smoothly and profitably.

Composition

Advisory Board: Members are typically selected based on expertise, experience, and success in their respective fields. They may include experts in finance, marketing, management, legal matters, and various other fields depending on the specific needs of the organization.

Board of Directors: Those who may participate in the board of directors include investors, major shareholders, and industry experts. They possess skills in finance, law, and management.

Responsibilities

Advisory Board: Members must have deep knowledge and experience in their field to provide valuable and reliable advice to the organization. Advisory boards are often tasked with shaping the organization’s long-term strategy, from market analysis to proposing product development and market expansion strategies. They must regularly provide feedback and evaluations on the effectiveness of the organization’s strategies and activities, helping to adjust and improve strategic decisions. When the organization faces challenges or complex issues, the advisory board is responsible for providing support and guidance to help the organization overcome difficulties. Maintaining ethical standards and professionalism: Advisory boards need to adhere to ethical principles and professional standards in all activities and working relationships with the organization they serve.

Board of Directors: Overseeing and evaluating the performance of the CEO and the management team. Approving expenditure plans and major projects. Ensuring compliance with financial regulations and laws. Making strategic decisions, including decisions on mergers and acquisitions, as well as the long-term development strategy of the company.

Authority

Advisory Board: They do not have voting rights or the authority to implement changes within the organization. Members of the advisory board typically do not have decision-making roles in strategic issues or daily management of the organization.

Board of Directors: They have the authority to vote and implement changes within the organization, including dismissing the CEO or changing the management team. Members of the board of directors often have the right to participate in strategic decisions and daily management of the company.

Advice

Advisory Board: Providing specific and practical advice on the operational changes of the company. Advice from the advisory board often focuses on practical and feasible methods to improve the performance and efficiency of the organization’s operations.

Board of Directors: Providing strategic advice and focusing on value for shareholders. The board of directors often focuses on building long-term strategies and creating value for shareholders through major business strategy decisions and financial management of the company.

Cost

Advisory Board: Members of the advisory board may be compensated depending on specific agreements and regulations of each organization. If you hire an advisory board from an external consulting firm, your company will have to pay a corresponding service fee based on the costs that the consulting firm incurs. This is a common form of payment when utilizing the services of external experts to support business decisions and organizational development.

Board of Directors: Costs are higher and include travel expenses and attending meetings.

Both the advisory board and the board of directors play important roles in the development of an organization, each with its own purpose and responsibilities. The advisory board provides specialized expertise and an external perspective, while the board of directors is responsible for the management and operation of the organization’s daily activities. However, the key is not just the presence of both boards but also the selection of the right business advisor, at CMG. ASIA, we understand the value of experienced and reliable advice. We can help you find the right advisor, someone who has faced the challenges you are facing and can share valuable lessons learned. Let us accompany you on the journey of your organization’s development and success!