Advisory Board Of a Company

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Advisory Board Of a Company

This blog articles discusses various roles and responsibilities of an Advisory Board that are at times like pillars in any organisation. Having an  Advisory board  in an organisations adds a value to the organisation -- adding benefits for senior management and ultimately stakeholders.

Advisory board

A group of individual, each having a in depth knowledge relevant to their field of business with a prime motive of business growth. The Advisory board members are both senior management people working in the organisation, consultants with specialised field knowledge together with the board of directors sharing and seeking high-quality advice. The members that constitute the Advisory boards do not hold any authority or powers in the legal or financial implication of the business. They have no formal powers and authority. Advisory board members have no fiduciary authority and and are not directors of the company. The member in the advisory board are not covered by the Companies Act 2006, so fall out or range of any legal liabilities of the company.

As the name says "Advisory",  the Advisory boards members are for advises, are for advice, having no control over the governance of the company. Advisory boards do not approve key decisions of the company and none of their decisions are binding. Furthermore, the advisory board is always formed for a tenure though, this can always be flexible with the discretion of the board of directors of the company.

An advisory board is formed with a focused and clear vision, based on which the Advisory board is formed. The purpose and roles of each member of the advisory board is defined--with overlapping at times. The need of setting up an Advisory board and its objectives and should be clear and what is expected from these member should also be well documented. Defining the role and purpose of the advisory board will ensure its effectiveness. The board of directors and/or senior management may benefit from setting up an advisory board of subject matter experts to advise on those technical and complex topics.

Benefits of an advisory board.

Advisory boards benefit organisations at different stages of their life cycle some common benefits are enlisted below

Entrepreneurs: Advisory boards will bring entrepreneurs a wealth of resources, including network contacts, partners, sponsors and access to resources. They will provide a sounding board to the entrepreneur(s).

Specific strategic objective : Companies may pursue a new strategic objective while lacking the internal resources to execute the strategy. Entering new markets or raising capital provide good illustrations of circumstances in which an advisory board may be drawn to advice management.

Technical mandate : Boards have broad responsibilities and some topics falling within their mandate are technical and complex, requiring specialist expertise. Examples include cyber security, artificial intelligence, climate change or capital model in the financial services industry.