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What are advisory boards and why are they becoming so popular?

By Jessica Tasman-Jones

This article is brought to you by Agenda, an FT Specialist publication that focuses on corporate boards

BT wants to transform from a traditional telco into a technology company. But digital transformation and tapping into areas such as private 5G networks are complex.

Enter the advisory board. The company held its inaugural meeting of industry leaders, including regional chief executives from Ericsson and Atos, in November to share insights, examine innovative ideas, and debate possible solutions to current and future challenges.

As companies grapple with complex challenges like AI, cybersecurity and sustainability, advisory boards are increasingly popular. There was a 20 per cent increase in the number of advisory boards globally between between 2021 and 2023, according to the latest State of the Market report, which is due to be published in spring by Advisory Board Centre, a professional body.

Over half (53 per cent) of newly created advisory boards are project based, according to early findings. Aon, for example, unveiled an advisory board in 2021 to support its M&A advisory practice to expand into areas such as cyber and intellectual property.

Earlier research suggests that most companies find these expert advisers useful. Almost all (90 per cent) of respondents to last year’s State of the Market report said advisory boards had a positive impact on the business. Some 15 per cent of companies saw positive financial results from their advisory board, and just 6 per cent said having an advisory board negatively affected their bottom line.

“High growth organisations are the most common users of advisory boards,” the report said.

Indeed, just last year, UK biotech companies Fusion Antibodies, AviadoBio and Oxford Cannabinoid Technologies all launched scientific advisory boards. Fusion Antibodies' chief scientific officer convenes quarterly meetings with its three-person panel and reports back to the corporate board, according to a spokesperson.

Advisory boards help company leaders gain “ready access to leading experts who collectively possess more pertinent knowledge than one specialist board member ever could,” says Beth Vanderslice, partner at Trewstar, an executive recruitment company that specialises in placing women and people of colour onto boards.

“They are uniquely qualified women and men who likely would be extremely difficult to recruit to the company’s leadership team,” she adds. With an expected tenure of about two years, their time with a company is brief, but that allows the advisory board to “set and fulfil very specific, well-defined expectations”.

Professors and executives are among the experts that join advisory boards. Members can also be tapped for their network, says Mark Freebairn, head of the board and financial management practices at executive search firm Odgers Berndtson in London.

Advisory boards have been particularly in demand in the private equity world to provide consultancy pre- and post-acquisition, he adds.

In the UK, pay is "highly negotiable" but tends to be towards the top end of what a non-executive director earns, says Freebairn. This reflects the expectation that advisory board members will be on hand to deliver advice, he notes.

Some companies require more time from their members. Meta’s content moderation oversight board are reportedly paid six-figure salaries for about 15 hours of work per week, which mostly includes deciding whether or not to remove content from the company’s sites.

The experience of advising companies is valuable in itself, according to Larry Quinlan, former chief information officer of Deloitte who now sits on the technology advisory board of Karat, a startup that helps companies conduct technical interviews. It opens opportunities to communicate with peers and connects members with a rich network of experts.

“I’m exposed to the strategies and goals of organisations. It continues to be a learning process in addition to contributing,” he says.

This article is based on a story written by Varvara Budetti for Agenda.

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