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It is not uncommon for people to misunderstand the distinction between an advisory board and a board of directors especially if they’re not familiar with it. The confusion can result from common terms (both boards are referred to as “the board”) or there is no clear document about the responsibilities of an advisory board in a bylaws or rules of the company and a distinction in the fiduciary duties.

A board of directors is the governing body for an company. It has the authority to take major decisions such as the replacement of the CEO, or changes in the executive management. It is also able to hold management accountable for its actions. Board members are bound by an obligation of fiduciary to the company and are legally accountable in the event that they fail to meet the requirements of this standard.

Advisory boards offer advice to the leaders of the business. They might be able suggest specific initiatives or changes however it’s ultimately up to the business leadership to decide if they want to adhere to the advice of the advisory board.

Typically, an advisory panel will consist of experienced third parties that bring a wealth of experience and industry connections. Members of the advisory position will help the company stay current with the latest trends and offer suggestions that will help the company grow. It could be as easy as streamlining customer service in line with recent buying habits or as intricate as developing the new strategy to support global expansion.