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Advisory Councils Provide Valuable Benefits To Boards Of Directors

What Is an Advisory Council?

Boards of directors generally do their best to develop well-composed boards that have the necessary skills and capabilities to run their organizations well. However, while a board may have a diverse, skilled board, the board may occasionally need some advice or guidance from a professional who has a different area of expertise than that of all of the board members. This is a prime example of how it can be helpful to have an advisory council member who can fill in that gap in expertise.

Some boards decide to start a special project and need manpower with specialized expertise to get the project off the ground and see it through to completion. This is another example of how advisory boards can fill the void of time and expertise that a board of directors has difficulty filling on its own.

An advisory council may also be referred to as a committee or board. Regardless of its title, advisory councils can serve various purposes to help further an organization’s mission and provide valuable benefits to boards of directors.

The Purpose of an Advisory Council

Before forming an advisory council, it’s crucial for boards to decide what the advisory board’s purpose will be. Common purposes for forming advisory councils are:

  • Providing technical expertise or advice in specific areas such as technology, science, health, policy, law, marketing, public relations, etc.
  • Helping spearhead a special project from planning to completion
  • Fundraising for a specific project
  • Providing an independent sounding board for the board of directors
  • Serving as an advocate for the organization
  • Fulfilling several roles for a nonprofit program where the organization serves as the fiscal agent
  • Serving in an honorary role
  • Offering services as a spokesperson for the organization

While the purpose of an advisory council varies based on the organization’s needs, all advisory councils should have a clear understanding of their purpose, guidelines and limitations.

Basics of Advisory Councils

Advisory councils are a group of individuals that effectively supplement the board’s skills and abilities to help guide the organization toward its stated mission.

Advisory councils don’t typically have any authority. In most cases, the board of directors retains the ultimate governing authority. The primary role of an advisory board is to provide the board with key information and to make recommendations to them on certain matters.

As a collective body that’s likely to have strong opinions, it’s important for boards of directors to provide some type of structure for their advisory councils so that their meetings are useful and productive. It’s helpful for advisory councils to have policies of their own, just as boards of directors have policies to help govern themselves. Boards may form policies for advisory board duties, meeting attendance, conflict of interest, ethics, decision-making or any other need that the advisory council has.

It’s also important for advisory councils to have a governing charter. A committee charter is a useful tool for providing a written description of the council’s role and purpose. The charter provides guidelines on the council’s membership, meetings and how they’re expected to communicate with the board. Boards should state whether the advisory council is a standing group or an ad hoc group that will only meet for a specified period of time. Certain circumstances may require specialized attention from an advisory council, so it’s often helpful when an advisory council charter specifies that the council can form subcommittees as needed to address certain short-term purposes.

Length of Service

Boards may form advisory councils as standing bodies that the board can rely on for regular guidance and advice. Depending on the advisory council’s purpose, the board may elect to make it an ad hoc council that works toward achieving a specific goal.

Advisory council members may have term limits, or they may serve indefinitely. The board generally appoints and removes members of the advisory council. The board of directors may also appoint a board chair. If they don’t, an advisory council may appoint their own chairperson or rotate the chair among the council members. It’s also common for at least one board director to serve on an advisory council.  

Benefits of an Advisory Council

Boards that work closely with their council members eventually develop a deep level of trust and confidence in their guidance over time, which is a strong asset to the board.

Advisory councils can also help to create greater efficiency on the board. Organizations that are growing quickly may become too large to be effective for complex or highly specialized projects. Smaller groups, such as an advisory council, often facilitate an environment that’s more conducive to productive communication and decision-making.

Another benefit of advisory councils is that they provide a forum for incoming or outgoing board directors. As terms for board directors expire, they may desire to continue serving the organization in some capacity. Boards may decide to transition board directors with expired terms from the board to the advisory council to retain the benefit of their knowledge base and expertise.

It can also be helpful for boards to consider moving advisory council members to the board as vacancies become available. Placing prospective board director candidates on the advisory council first gives boards time to develop a relationship with them and to assess their skills, commitment and capabilities before giving them a formal offer of a board seat. 

Do Advisory Council Members Receive Compensation?

Nonprofit organizations typically lack the funds to offer compensation to their advisory council members. Advisory council members of nonprofits nearly always serve on a volunteer basis, just as nonprofit board directors do.

On the other hand, corporate boards often benefit by paying their advisory council members with the goal of keeping them actively engaged and invested in the company. Paid advisory council members may be paid with a retainer or on a per-meeting basis. The average advisory council meets about four times a year.

According to Susan Stautberg, head of a New York advisory board service, advisory board payments range from $1,000 per meeting to about $25,000 per year for big banks, plus meeting and travel expenses. Advisory council members may also receive stock options as part of their compensation.

Advisory councils are bound by the same rules for confidentiality as board directors, so it makes sense that they should use a highly secure board portal and a secure electronic communications platform to conduct their work. Since advisory boards don’t meet as often as regular boards, governance software will also help them work as efficiently as possible.

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