The Real Value of a Board of Advisors Role and Search

Posted in Board Development by Jim
03 Sep

Often the term Board of Directors (BOD) gets confused with Board of Advisors (BOA) or just plain Board. A Board of Directors is a very specific entity. It has two main purposes:

  1. To Hire and Fire the CEO
  2. To approve corporate strategy

Those are very direct and simple purposes, but in reality they are very complex and all encompassing. Often companies have a Board of Directors in title, but by definition they would be unable to execute either purpose. The CEO or an investor in the company owns enough shares in the company that the board is more advising than directing.

A Board of Advisors can perform all of the duties of a Board of Directors but not have the same fiduciary responsibilities. There are several key differences:

  • BOA that acts like a BOD in almost all aspects
  • Scientific BOA- for technical companies made up of industry experts
  • Customer BOA- for new or customer focused companies that want the voice of the customer heard
  • Industry BOA- this is specific to an industry and is typically have a wide variety of individuals who work or consult in the industry and have the overall advancement of the industry or sub-industry

Public companies and non-profit (503C) organizations must have a Board of Directors because of government oversight. Private companies do not have to have a Board of Directors but often have a “Board” when they get to a certain revenue size (often above $50M) or ownership structure (multigenerational family business or a business with multiple inside and outside ownership).

When I am asked by private companies to set up a board I first suggest a BOA over a BOD just so they can get used to the board oversight that happens when one is created without all of the structure that a BOD requires.

For more information about how Cardinal Board Services can help your board of directors search call (952) 314-4636 or click here.