An advisory board is a group of independent people that provide strategic advice and support to the business owners.
The structure of an advisory board is different to that of board of directors in that advisory boards are:
- Not regulated under Corporation’s act or corporate governance codes
- More informal in nature
- Focus on providing advice
- Not a decision-making forum.
The main purpose of the advisory board is to provide the business owners with an independent opinion on the strategic path and options the business owners are considering. What is important to distinguish is that the ultimate decision maker is the business owner and that the advisory board is completely indemnified from the outcome of any decision the owner makes.
Composition of an advisory board
As each business and business group is unique, the composition of the advisory should consider this uniqueness. Typically however the advisory board may consist of:
- Family members (including those directly and indirectly involved)
- Key executive/management team
- Key stakeholders
- Members in other areas of expertise/industries.
The advisory board members may change over time as the needs of the business owners change.
It is expected that advisory board members that are external to the family group would be compensated for their time and involvement which is generally negotiated with each member separately.
When should you consider an advisory board?
An advisory board may be considered by small to medium enterprises where (but not limited to) the following:
- The business is experiencing significant and rapid growth
- The business is considering a major decision and/or change in direction
- The establishment of an advisory board is an added support tool as part of the business’s broader succession plan
- The business wants to raise the level of strategic conversation in every aspect of the business.
The benefits of an advisory board include:
- Provide support to the business owners as when they require
- Draw on the skills, knowledge and experience of advisory board members
- Enhance and challenge the strategic options of the business.
The establishment of an advisory board provides business owners access to external yet trusted opinions on the strategic path of the business whilst acting as support tool as part of the business’ succession plan.
If you wish to discuss the ideas raised in this article, please contact your Bentleys Advisor, or contact us via the General Enquiry form.
Disclaimer: This information is general in nature and should not be relied on as advice. It does not take into account the objectives, financial situation or needs of any particular person. You need to consider your financial situation and needs and seek professional advice before making any decisions based on this information.