What is an Advisory Board?
Companies are searching for a wide variety of outlets to provide them with business advisory services. This type of advice can help an enterprise grow beyond its competitors and increase the value of the shareholder. If a company decides to go public, then it is legally necessary to set up a structured board of directors.
The Advisory Board is a very informal group of members chosen by the Management Team or the Board of Directors. They provide important assistance to the company but do not have any fiduciary duties.
Nature of Advice
In general, advisory boards are set up to concentrate on the large picture, offer unbiased guidance and contribute to strategic planning. Effective advisers may provide fresh perspectives and thoughts on new or unfamiliar topics, respond to suggestions from company owners and managers, play the devil’s advocate, and provide high-quality strategic advice to help key decision-makers.
How is an advisory board different to a board of directors?
|ADVISORY BOARD||BOARD OF DIRECTORS|
|Big picture – strategy and trends||Concerned with detail|
|Flexible structure and management||Formal structure and management|
|Non-binding strategic advice||Decision making power|
|No authority to act on behalf of the company||Authority to act on behalf of the company|
|Role is not defined, and members owe no fiduciary duties to the company or its shareholders||Fiduciary duties, e.g. a responsibility to act in good faith in the best interests of the company and for a proper purpose|
|Technically have no legal liability or legal responsibility||Bound by the rules and regulations of the Corporations Act. Responsible for company performance and conformance with legal and regulatory requirements and the directors can be held legally liable for not fulfilling these duties.|
Advantages of an Advisory Board
Company ownership and CEO positions can be lonely places, with few people to trust or use as a sound board to test ideas and concepts. The Advisory Board can require owners or managers to have access to an unbiased view or ‘secure’ place to discuss issues of major significance.
- Drawing on the expertise and experiences of consultants who have practical experience in growing a company
- Gaining expertise and experience from past competitors, main suppliers, or customers.
- Enhancing the image and credibility of the company in the marketplace by aligning with key individuals
- Attracting top talent by showing commitment to development and openness to external ideas
- Creating a potential member source for the ‘main’ board as the company grows.
Around 300 business owners in Sydney, Melbourne and Brisbane meet monthly to share their business plans, priorities and performance with their Coraggio Advisory Board who then debate, brainstorm and strategize to drive the best outcome for the individual and their business.
Learn more about Coraggio by attending our Introductory Board Meeting.