 | Greg Ast
is president of Legasus Group (www.LegasusGroup.com), a family business consulting firm offering services designed to enhance clients' growth, success and profitability. Legasus Group has a staff of trained professionals - specialists in management, family-owned businesses, strategic planning, profit enhancement, finance, international business and executive development that work with family-owned and privately-held businesses. You may contact Greg at (316) 681-0444 or by e-mail at gast@legasusgroup.com. |
Business Consulting
2003-07-01 16:09:00
Advisory vs. legal board
: I've been asked to serve on the advisory board for a local company. I'm interested in the position, but I want to know what I'm getting into here. Is there anything I should know about the purpose and structure of an advisory board versus a legal board of directors?
ANSWER: Let's begin with the similarities. First of all, we believe an advisory board can be a valuable resource to any company. The goals of an advisory board have some commonalities to a legal board of directors. Both boards exist to: Provide input and feedback that will help ensure the survival and growth of the company, Independently assess the company's strategic plan, Promote constructive questioning and open dialogue about the company and the challenges it is facing, and Provide individual expertise and coaching to assist senior management. As for the differences, the biggest is that a legal board is elected by the owners and has a legal (fiduciary) responsibility to the owners. Because of this legal responsibility, we encourage anyone considering a legal board of director position to consult an attorney. They will help you understand more about the requirements and risks to being on a legal board of directors. The advisory board, on the other hand, is selected at the discretion of the CEO and/or owners and is purely advisory. Its effectiveness is directly correlated to how seriously the owners and the CEO consider the input of board members. We have a client, a company president, who takes the advice of his advisory board as if they were a legal board. He values their input and knows they truly represent the long-term interests of the family shareholders. I would suggest that the most important aspect you consider is whether the board role you are being asked to fill is one of serious intent. Sometimes, we find owners form advisory boards to fulfill ego needs, a reluctant request of minority shareholders, or for purely social reasons. Usually, these boards prove to be less effective to the company. It would be of value to ask if the advisory board will eventually convert to a legal board. Usually, companies that eventually commit to legal outside boards are serious about effective governance. If the owner's goal of forming an advisory board is to truly assist the company's leadership in achieving future success, I would recommend you seriously consider the position. You, and the owner, will both benefit.
