The advisory board of a company can assist in addressing business demands and devising long-term strategies. Effective advisory board members are highly experienced individuals who can contribute their knowledge to your organization and counsel leadership. These are individuals who understand your industry and have background in professional realms like law, finance or marketing. Often advisory boards are made up of volunteers who wish to assist your organization. They could be current members of the board of directors or they could be recruited by external sources. They meet regularly or semi-regularly, typically 6-8 times per year. They can be mentors for the CEO and leadership team.
Typically, members of an advisory board aren’t compensated for their time, however they are reimbursed for the expenses associated with meetings. The size of an advisory panel can be adapted making it possible to establish and expand a board based on company needs. In addition, an advisory board can be more informal than a regular board of directors, which helps reduce the risk of liability.
It is essential for a company to establish clear boundaries so that their advisory board doesn’t begin acting as an advisory board and take on all of the liabilities associated with it. This is why it’s important to write a documented clarification of the advisory board’s duties for example, a board resolution or in their bylaws. This will make it easy to ensure that they are accountable, and will avoid confusion. As a business expands it’s normal for advisory roles to become more formalized, and eventually change into the full board of directors. This typically happens when the acquisition of investors or reaching a certain amount in operations.
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