Question

which of the following statements about advisory boards is incorrect?question 9 options:a) similar to a board of directors, an advisory board has legal responsibility for the firm in certain areas.b) an advisory board is a panel of experts who are asked by a firm's managers to provide counsel and advice on an ongoing basis.c) a growing number of startups are forming advisory boards.d) an advisory board can be established for general purposes or can be set up to address a specific issue or need.e) the fact that a corporation has a board of directors does not preclude it from establishing one or more advisory boards.

Answer 1

The incorrect statement about advisory boards is that they have legal responsibility for the firm, which is actually the role of the board of directors. Advisory boards offer non-binding strategic advice without the associated legal responsibilities.

Step-by-step explanation:

The incorrect statement about advisory boards is: a) similar to a board of directors, an advisory board has legal responsibility for the firm in certain areas. Unlike a board of directors, advisory boards do not bear legal responsibility and their role is purely consultative, providing expert advice and guidance without the power to vote on corporate matters. Advisory boards are comprised of a panel of experts who provide non-binding strategic advice, giving the firm the benefit of their experience and insights without incurring the legal responsibilities that a board of directors would have.

While the board of directors has a fiduciary duty to the shareholders, making decisions that are legally binding, an advisory board's contributions are not legally enforceable and are meant to guide rather than to govern.

It's true that startups increasingly form advisory boards to leverage specialized knowledge and networks. Also, the existence of a board of directors does not limit a company from establishing one or more advisory boards. Such advisory groups can offer valuable expertise to the firm's management on an ongoing basis or for addressing specific challenges or opportunities.