A company’s advisory board can help in addressing business demands and formulating long-term plans. Effective advisory board members are highly experienced individuals who can contribute their knowledge to your organization and counsel on leadership. These individuals are well-versed in your field and have a background of professional fields such as marketing, finance, or law. Typically advisory boards are comprised of volunteers who want to assist your organization. They can be members of the board or recruiters from outside. They meet regularly, or frequently. Most often, they meet between six and eight times per year. They may also serve as an advisor to the CEO and other leadership.
The majority of members of an advisory council are not paid for their time but reimbursed for their meeting expenses. In addition, the size of an advisory board is flexible and makes it easy to establish and expand based on the needs of the company. A traditional board of directors is more formal than an advisory board which can help minimize liability risks.
It is essential for a company to establish clear boundaries in order that their advisory board does not become a board and assume all the responsibilities that come with it. This can be done by writing a formal explanation of the advisory board’s role in the board resolution or their bylaws. This will make it easier to make them accountable and reduce confusion. As a company grows it’s normal for advisory roles to be formalized and then transform into a full board of directors. This typically happens when acquiring investors or reaching a certain amount in operations.
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