Advisory board

An advisory board is a less formal alternative to a full board of directors. Its members meet with the owners and senior management, review plans and performance, and offer advice. They do not vote on company decisions, cannot appoint or remove the CEO, and generally do not carry the legal duties of directors.

Many founders are reluctant to hand authority to outsiders. An advisory board lets them bring in outside experience without giving up control. It is often a first step: a family that finds its advisory board useful may later turn some of its members into independent directors on a formal board.

Advisory boards are typically small, often three to five people, and meet a few times a year. Members are usually paid a fee for their time.

Advisory board or board of directors?

The difference is authority. A board of directors governs the company and is legally accountable for it. An advisory board advises, and the owners are free to ignore what it says. That freedom is both its appeal and its weakness: advice that is never acted on soon stops being given seriously. Families should check with their lawyer how an advisory board is set up so that members are not treated as directors by accident.

Why it matters for the successor

An advisory board can be a valuable practice ground. The successor can present plans, answer hard questions and receive candid feedback from experienced people who have no family history with them. For a successor who will later lead a formal board, presenting to an advisory board builds the habits that matter: leading with the decision, owning the numbers and handling pushback calmly. Executive presence in board meetings covers what directors tend to notice.