A board of directors is usually invaluable in providing oversight, strategic planning, and facilitating good corporate governance. But even so, the board may sometimes lack the needed talent, compelling it to consult an advisory board – prompting the debate of board of directors vs advisory board.
Ideally, the board of directors enjoys decision-making powers that an advisory board doesn’t. These powers include the ability to institute and dismiss the advisory board. As the name suggests, the advisory board only offers advice. It doesn’t make binding decisions, as is the case of the board of directors.
Having said that, both boards have massive contributions and can coexist. Even more importantly, it’s beneficial for the organization to use both boards when needed. As the board of directors relishes the decision-making mantle, the advisory board can offer guidance that the board of directors may accept or disregard.
This guide will help you distinguish the two boards, especially regarding their roles and responsibilities, setup or structure, and operation differences. Let’s dive in!

Key Takeaway
- A board of directors is a group of qualified persons elected by shareholders to represent their interests and provide general oversight.
- An advisory board is a body of experts handpicked to offer advice on different issues, including guiding companies and the board of directors.
- Part of the board of directors’ roles and responsibilities include strategic planning, policy establishment, executive oversight, financial oversight, risk management, brand promotion, and corporate governance.
- Part of the advisory board’s roles and responsibilities include strategic guidance, providing market insights, corporate networking, problem-solving, and leadership mentorship.
- A board of directors comprises inside and outside directors and features at least the chairperson, vice chair, board secretary, and board treasurer.
- An advisory board features at least an independent chair, multi-sectoral advisors, and in-house representatives.
- A board of directors is handy when a company needs an authoritative body with legal powers to make binding decisions and provide executive and financial oversight.
- An advisory board is recommended when a company requires expert guidance on emerging technology, market diversification, or the latest scientific advances, among other needs that call for expert opinion.
- The board of directors and the advisory board share similarities in general purpose, public representation, and some interests.
- The board of directors and the advisory board differ in purpose, governance and fiduciary responsibilities, decision-making powers, selection mode, formality, experience/expert level, and tenure.
Board of Directors Vs Advisory Board Summary
– | Board of Directors | Advisory Board |
Purpose | Protect shareholders’ interests | Offer advisory service |
Corporate and Fiduciary Responsibilities | Have corporate and fiduciary responsibilities | Have no corporate or fiduciary responsibilities |
Decision Making | Enjoys decision-making power | Don’t have decision-making powers (are only advisors) |
Selection | Elected by shareholders | Appointed by the client company or board of directors |
Formality | Are well-structured and formally run | Are more flexible and less formal |
Experience Level and Expertise | Limited scope | Have a broad pool of talents |
Tenure | Long-term | Short-term (when needed) |
What’s the Board of Directors?
A board of directors is a group of like-minded individuals elected by a company’s shareholders to oversee its management, set its business strategy, and protect its interests. All public companies must have a board of directors within their ranks to serve as the supreme authority for critical corporate decisions. The board is, however, optional for private entities.

Roles and Responsibilities of the Board of Directors
The board of directors generally performs the following duties:
- Strategic Planning: The board of directors defines its business strategy for the future and outlines the plan to arrive at it. It establishes the sequence in which the organization can realize its goals and vision.
- Policy Establishment: The board of directors helps create flexible company policies. They develop policies for dealing with conflicts of interest, code of conduct, crisis management, dividend declaration, and data protection, to name a few.
- Executive Oversight: The board of directors oversees the appointment, assessment, and dismissal of the company’s top executives, such as the MD, CEO, and CFO
- Financial Oversight: The board of directors reviews and monitors company budgets and financial statements and uses the information to make critical financial calls.
- Risk Management: The board of directors heads efforts to mitigate and address risks when they crop up to protect the company and stakeholders from considerable setbacks.
- Brand Promotion: The board of directors promotes and maintains a strong brand identity in the eyes of the general public and stakeholders.
- Corporate Governance: The board of directors ensures compliance with laid-out regulatory standards on corporate governance. It provides transparency, responsibility, and utmost accountability among board members when dealing with various stakeholders.
Types of Board Members
Ideally, members of the board of directors belong to two groups;
- Inside Directors: Inside directors (executive directors) are members of the board of directors who are either top-level employees such as the CEO, COO, or MD or key stakeholders or their representatives. They are usually involved in the day-to-day running of the company.
- Outside Directors: Outside directors (non-executive directors) are neither company employees nor key stakeholders. They come from third parties, such as union representatives, and are thus not involved in the company’s day-to-day affairs. They may, however, be compensated for their contributions, including attending board meetings.
Structure of the Board of Directors
A board of directors may have five or more board members, and the most notable ones include the following:
- Chairperson: The chairperson or the board president heads the entire board. They set meeting agendas, convene and chair meetings, and establish committees. They also represent the company at public events and can hire and fire top-level executives with the board’s backing.
- Vice Chair: The vice chair is the second in command after the chairperson. As the number two, the vice chair can assume the chairperson’s roles and responsibilities at board meetings and events in their absence.
- Board Secretary: The secretary assumes the administrative duties of the board. They take minutes during board meetings, prepare agendas (after receiving direction from the board chair), and keep accurate company records.
- Board Treasurer: The treasurer handles the financial aspects of the board, including budgeting, accounting, and monetary policies. They are responsible for the company’s financial well-being.
- Other Members: The other board members may be nominees by interested parties – mostly outside directors.
Selection of the Board of Directors
Regarding public companies, the board of directors members are elected by the shareholders during an annual meeting. Before that, the nomination committee identifies qualified candidates and submits their names before the election date.
But still, investors advocating for a change of guard may suggest some names, and then it’s up to the shareholders to vote for the members they prefer the most.
However, the selection process in a private company is different. Depending on the company and its bylaws, the company founders or owners may handpick the individuals they prefer to join the board of directors.
Likewise, dismissing a board of directors member follows the same pattern as the appointment. If the shareholders appoint the board members, they can fire them. If it’s the owner or founder, they, too, have the power to do the same.

When to Use a Board of Directors
Ideally, a board of directors is worth considering by a company that needs:
- An authoritative body with legal powers to make binding decisions, fulfill its fiduciary obligations, and facilitate compliance with relevant corporate governance protocols.
- An executive oversight body to recruit, evaluate, and potentially dismiss non-performing top executives.
- A financial oversight body to approve budgets, review financial statements, and make complex financial calls.
Note:
A board of directors is mandatory for public companies, so there are no debates. However, private entities stand to attain better management, financial oversight, and corporate governance with a board of directors than without it.
What’s the Advisory Board?
An advisory board, also known as a board of advisors, is a group of talented professionals who offer their knowledge, skills, and expert guidance to an organization. In this case, the organization could be a company, association, or nonprofit.
In the case of a nonprofit, these professionals offer their professional assistance out of charity – without expecting compensation. They are, however, compensated by corporate organizations.
An advisory board’s primary role is to bridge the knowledge gap that subsists in an organization. The board advises on various issues, from emerging technologies and human resources to marketing and regulatory matters. They are simply the go-to guys when a company, especially its board of directors, needs clarification or a second opinion before making a decision.
Roles and Responsibilities of the Advisory Board
The advisory board performs a variety of duties, which include the following:
- Strategic Guidance: The advisory board can guide the board of directors in developing better strategic plans for the company. They can offer suggestions on better channels for reaching an organization’s goals.
- Market Insights: The advisory board can study the market on behalf of client companies and offer insights and suggestions regarding competition, new products, audience acquisition, and emerging opportunities.
- Corporate Networking: The advisory board can help a client company establish the right corporate networks, including exposing it to potential partners and investors.
- Problem Solving: The advisory board can offer better ideas on solving a client company’s problem. They can suggest ideas that provoke critical thinking and facilitate better decision-making by the board of directors.
- Leadership Mentorship: The advisory board can mentor top company leadership on unfamiliar matters, such as emerging technologies and entrepreneurship.
Structure of the Advisory Board
An advisory board comprises members from different industries, which could be anything from law, health, and human resources to finance, accounting, IT, and marketing. Ideally, there should be at least the following individuals:
- Independent chairperson
- Outside advisors (and this is where the experts come in)
- In-house representatives (which could be a director, a top executive such as the CEO, or a key stakeholder)
Selection of the Advisory Board
The client company handpicks an advisory board; in most cases, the board of directors relishes this responsibility. The directors can handpick the board of advisors they want to help them with whatever they are dealing with. Likewise, the board of directors can disband the advisory board when they no longer need it.
When to Use the Advisory Board
An advisory board comes in handy when a company needs help with:
- Expert guidance on emerging technology, market diversification, or the latest scientific advances
- Public awareness of products and services
- Improving public relations and company image
- Challenging its ‘own’ assumptions on technical matters which they might not have adequate knowledge of
- Seeking networking opportunities, especially outside their usual territory

Advisory Board Member Salary
Usually, members of a nonprofit advisory board don’t get direct compensation for their contributions as they are voluntary. They may get reimbursed for travel, accommodation, and other costs associated with working for the client company, but they don’t get a salary.
In contrast, corporations mostly compensate their board of advisors, which is about $72,846 a year on average or about $35 an hour. The yearly package, however, could be anything from $38,500 to $146,000, depending on the organization’s size and the advisory board’s reputation and expert level.
Board of Directors and Advisory Board Similarities
The board of directors and the advisory board share a few similarities, as shared below:
- General Purpose: Although a board of directors is mandatory for public companies while an advisory board isn’t, the two share a common goal: to steer the organization to success and realize its strategic plan.
- Public Representation: The board of directors and the advisory board represent their respective organizations in public matters. They are simply brand ambassadors.
- Interests: Both boards are interested in observing good corporate governance to help the company attain its objectives and strategic plans. They are critical in overseeing, analyzing, and reporting on the organization’s performance.
Board of Directors Vs Advisory Board Key Differences
The board of directors and the advisory board might share a few things. However, they equally differ in several ways, which include:
1. General Purpose
The board of directors is established to protect the interests of shareholders and make binding decisions on matters like executive recruitment, strategic planning, and policy creation. On the other hand, the advisory board is instituted to assist the company and the board of directors in particular in pursuing its goals.
2. Governance and Fiduciary Responsibility
The board of directors has a governance responsibility, making it accountable and answerable for the company’s success or failure. Members of the advisory board don’t have such responsibility. Their only responsibility is to be the voice of reason when the company leadership or board needs insights or advice on something that requires an expert opinion.
A board of directors also owes the client company several fiduciary duties, which include Duty of Care (to consider all decisions to protect the stakeholders’ interests thoughtfully), Duty of Confidentiality (to keep ‘confidential’ information confidential), and Duty of Loyalty (to serve in the best interest of the company). In contrast, an advisory board doesn’t owe any of those fiduciary duties.
3. Decision-Making
The board of directors members have voting rights, allowing them to decide on behalf of the company and stakeholders. Members of the advisory board don’t have such rights.
While the advisory board members can attend board meetings, promote the client organization in public spaces, and make donations, they aren’t allowed to vote, create policies for client companies, or make financial decisions. That solely falls on the board of directors’ hands.
4. Selection
The company’s nomination committee nominates the board of directors members, who are then elected by shareholders based on their experience and professional knowledge or the stakes they enjoy in the company.
In contrast, the board of advisors’ members are handpicked by the board of directors solely based on skills and experience. They don’t have stakes in the company.
5. Formality
Boards of directors are highly structured and well-regulated entities. They are run by bylaws and strict policies that all board members must adhere to. In contrast, the advisory board is less restrictive. It is not as structured and less regulated, making its operations more flexible.
6. Experience Level and Expertise
Though you can expect the board of directors members to have different academic and professional backgrounds and experiences, sometimes this is not the case. They may fall short in some areas, and that’s where the advisory board comes in. A competitive advisory board typically brings together experts in different fields who can provide practical solutions to match problems a client company is dealing with.
7. Tenure
Advisory board members are consultants and are only called upon when their needs arise. The body can be assembled by the board of directors and disassembled at any time, unlike a board of directors that must always be there to provide executive oversight and promote corporate governance.
Can You Have Both an Advisory Board and a Board of Directors?
The fact that the advisory board and the board of directors have different roles and responsibilities means you can have both boards. Doing so allows the board of directors to benefit tremendously from the advisory board’s wealth of talent and experience.
In this case, the advisory board can offer the board of directors expert advice on technical matters and insights, which can help them make decisions. Remember, however, that the board of directors doesn’t have to accept the advice of the board of advisors. They can follow or ignore it, as they have the ultimate decision-making power.
The Wrap!
Understanding the differences between the board of directors and the advisory board is vital for any company that requires their input. On one hand, the board of directors helps with strategic planning, improving regulatory compliance, managing corporate risks, and facilitating accountability.
On the other hand, an advisory board offers unbiased expert advice on important decisions that are key for the company’s strategic planning, brand awareness, network expansion, and other needs.
Companies, particularly public entities, need both boards, and the Center for Corporate Governance (CCG) can help. We are a leading corporate governance institution in this part of Sub-Saharan Africa, driven to help client companies embrace the correct corporate governance culture, which includes understanding the various roles of the different boards.
We currently run a monthly 5-day mastery course on corporate governance and leadership excellence that we highly recommend to corporate organizations, especially the top management and executives. You can check it out on our website!