As companies evolve, the need for more structured decision-making, strategic monitoring, and qualified exchanges with experienced professionals also increases. In this context, implementing a board—whether advisory or administrative—is a strategic decision that can determine the pace and quality of organizational development.
However, legitimate questions arise between the two models:
What is the difference between them? At what stage does one or the other make more sense? Are there legal requirements involved?
More than a formal choice, selecting the right type of board requires a precise understanding of the organization’s current stage, its ownership structure, and the maturity level of its leaders.
In this article, we clarify the functions, differences, and criteria for adopting each model—with a focus on governance effectiveness and alignment with the company’s objectives.
What is an Advisory Board?
The advisory board is an optional body, not required by law, designed for companies seeking to enhance their strategic decisions through the perspective of experienced professionals, but without transferring decision-making power126.
It acts as a consultative entity: it provokes, challenges, supports, and suggests, but does not formally decide.
Its role is to broaden the perspective of shareholders or top management, based on practical experience, market vision, and applied knowledge69.
It is especially recommended for:
-
Companies in a growth phase that need to professionalize
-
Family businesses undergoing generational transition
-
Businesses seeking access to new markets, innovation, or structural transformation
What is a Board of Directors?
The board of directors, on the other hand, is a formal governance body with deliberative, legal, and fiduciary powers.
It is the highest governing body of a corporation and, as such, its formation is mandatory for certain companies, especially publicly traded ones136.
Its role is to supervise the executive management, approve strategic guidelines, validate significant investments, and represent the interests of shareholders.
It is a more rigid structure, with clear rules for election, terms, and accountability346.
A board of directors is recommended for:
-
Companies already operating with a consolidated executive team
-
Organizations requiring stricter control between ownership and management
-
Businesses with a complex ownership structure or subject to intense regulation15
Why do growing companies opt for an advisory board?
Because the advisory board offers flexibility, confidentiality, and agility, without the legal obligations of an administrative structure16.
For companies still led by founders or those maturing their management, the advisory board acts as a bridge between operational and institutional logic.
It introduces strategic thinking without compromising autonomy or making the decision-making process rigid.
Additionally, since it does not have deliberative power, advisory board members do not assume formal legal responsibilities, which broadens the range of profiles available to join the board—often facilitating the engagement of senior executives who do not wish to have ownership ties26.
A common mistake: creating a “one-person board”
When setting up an advisory board, many companies make a recurring mistake: inviting only one trusted person to serve as an advisor.
The problem is that, in this format, what you have is not a board—it’s an informal consultant.
A board requires a plurality of backgrounds, views, and experiences. The exchange among different advisors creates counterbalances, complements perspectives, and enhances debate.
Without this, there is a risk of reinforcing a single point of view and losing precisely the value the board should bring: expanding the capacity for analysis and decision-making.
As the saying goes: “If you have one, you have none.”
And when does a company need a board of directors?
The need for a board of directors mainly arises in two scenarios:
-
Due to legal requirements, as in the case of corporations
-
Due to organizational complexity, when the owners are no longer involved in day-to-day operations and need a body to represent their interests with decision-making power56
In such cases, the board of directors must be formed based on well-defined technical and legal criteria, adhering to regulations, internal bylaws, and best governance practices—such as those recommended by the Brazilian Institute of Corporate Governance (IBGC)6.
Conclusion
Defining the board model is a fundamental step in the governance journey.
Choosing between an advisory board or a board of directors is not just a matter of stage or formality—it is a strategic decision.
While the advisory board offers support and perspective, the board of directors exercises authority and control.
Both have value—as long as they are aligned with the organization’s maturity, its legal structure, and clarity about the roles of each participant.
And more important than the type of board is the quality of the people who comprise it.
Because, in the end, what defines the effectiveness of any governance model is the ability of the voices at the table to expand, challenge, and sustain what truly matters: the future of the company
