What is the difference between a Governance Board and an Advisory Board?
A Governance Board (you as Directors) and an Advisory Board (or Family Council) are the same in every respect except for one crucial difference – a Governance Board makes decisions while an Advisory Board makes recommendations.
If your business is operating in a company or corporate trustee structure, there will be Directors - who in effect do form a 'Board'. The most common issue we find is that the Directors are not acting like a Board or Governing body. And in many cases, not fully aware of the duties they take on as Directors, nor the benefits of having more formal processes for the Board and meetings (for dealing with higher level issues like Strategy, Risk, Culture, Management oversight and guidance, Shareholder / Family engagement etc).
An Advisory Board on the other hand is very flexible in its structure and operation as they are fit-for-purpose. They complement the basic Governance Board and won’t dilute decision making nor equity. An Advisory Board could focus on a specific business opportunity, complement the Governance Board on strategy formulation, or have a philanthropic focus.
Some situations you may wish to consider creating an Advisory Board are:
- Expanding the business into a new market or geography.
- Introducing the next generation into the business strategy and governance.
- Implementing a Family Council to keep non-equity and non-management family members updated and provide opportunities to be involved such as philanthropy.
- Business succession planning.
By Western Australian based Family Business Accredited Advisor
Director
Strategic Intent Advisory
ADVISORY BOARD CHAIR | NON-EXECUTIVE DIRECTOR | COACH
