Entrepreneurs: Advisory committee or board of directors?

Entrepreneurs: Advisory committee or board of directors?


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Published on 07 November 2018
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Entrepreneurs: Advisory committee or board of directors?

Setting up an advisory committee is often considered the first step before establishing a formal board of directors. An advisory committee is an invaluable corporate governance structure that will deliver value added, rapidly bolstering company growth and profitability while contributing to sound risk management. The following is a glimpse into this committee and its range of benefits.

What is an advisory committee?

An advisory committee is a multidisciplinary group of experts that meets a few times a year to support you in your entrepreneurial role. These seasoned professionals provide you with the necessary support in implementing your business plan, resolving issues and driving growth initiatives.

However, this committee has no decision-making power. To optimize its effectiveness, it should be made up of people with skills that complement your own. A source of fresh insight, this committee can make a substantial contribution to your business, playing an essential role at key stages in your company’s development.

  • Provide the company with better strategic direction

Running the company day to day, do you often fret about strategic planning? To avoid competitive missteps or major oversights executing your business plan, you may find an advisory committee with its strategic insight is an idea whose time has come.

  • Enhance the company’s credibility with external partners

With guidance from an advisory committee, finding a new supplier, an angel investor or a partner is much less daunting. Outside observers look favourably on companies that leverage independent committee member expertise to drive development. By the same token, you’ll be demonstrating that your SME is supported by seasoned professional advisors.

  • Break the isolation

We all know it can be lonely at the top. Seasoned advisory committee experts can provide some much appreciated support. You’ll expand your social network, and potentially broaden your outlook on the challenges ahead with the added insight.

  • Attract top talent

If you’re having a hard time recruiting the right person and constantly in search of highly specialized experts, why not leverage the business networks of advisory committee members?



And the board of directors?

The board of directors also plays a key role in the corporate governance system. As a rule of thumb, it takes over from the advisory committee when a company goes public or an external investor takes an equity interest in the company. It typically comprises five to seven directors, elected by the shareholders. It has more formal mandate than the advisory committee, as its decisions are binding on company directors and officers. Like an advisory committee, a board of directors is composed of experienced professionals who provide you with strategic insight. It is required to discharge a number of duties and responsibilities, such as:

  • Approve strategic directions and associated budgets.
  • Monitor the company’s financial strength.
  • Ensure the company is being managed effectively.
  • Assess the CEO’s performance periodically.
  • Determine executive compensation.

Some financial partners may require an SME to have a board of directors in place. They may at times suggest director nominees, thereby facilitating accountability and reporting on progress achieved. At some much smaller SMEs with limited financing, establishing an advisory committee may suffice, with a board of directors only required when the commensurate growth materializes.

Make an informed choice

Regardless of which governance structure you implement, it will have a positive impact on the way you do business going forward. Whether they serve on an advisory committee or a board of directors, its members will boost company productivity and innovation and help you better manage the operational risks that arise along the way.


Advisory Committee

Board of Directors

Decision-making power


Yes. Decisions are binding on senior management.


Selected by the entrepreneur.

Elected by shareholders.


None. Committee members have no personal liability in performing their duties.

Directors have a fiduciary duty and are legally liable to the company and its shareholders.