We often talk about digital transformation, customer experience, and capital strategy when it comes to banks. But what if the real story behind profitability is not about technology or regulation at all, but about people?
Not the ones serving customers or managing accounts, but those sitting around the boardroom table.
A new study by researchers from Onsi Sawiris School of Business at the American University in Cairo takes a closer look at how boardroom composition influences the financial performance of banks in the MENA region. And its findings are, to say the least, surprising.
The Paradox of Good Governance
For years, the dominant belief has been that stronger governance leads to stronger performance: more independent directors, more diverse boards, and more accountability. The logic sounds irrefutable. But what happens when the data tells a different story?
After analyzing 113 banks across nine MENA countries over an eight-year period, the researchers found that two board features widely considered global best practices, having a higher share of independent directors and more women on the board, were actually linked to lower profitability.
It is a paradox that challenges the traditional view of corporate governance. Progress on paper, it seems, does not always translate into better performance in practice.
When Inclusion Isn’t Integration
Before drawing conclusions, it is worth understanding why this might be happening. The issue is not independence or gender; it is influence.
In many MENA banks, independent and female directors are still navigating deeply rooted hierarchies. Their presence may fulfill regulatory requirements, but their power to shape strategic decisions often remains limited. The gap between representation and authority is where profitability begins to slip.
It is not that diversity does not work. It is that diversity without empowerment remains symbolic rather than transformative.
The Region’s Leadership Reality
Perhaps the most intriguing finding is that some governance structures often discouraged by Western frameworks appear to have the opposite effect in the MENA context. CEO duality, where one person serves as both chief executive officer and board chair, was associated with higher profitability.
In other words, the very structures global advisors warn against may, in this region, actually support stronger performance. This does not mean that MENA banks should dismiss international standards altogether, but it does highlight an important truth: governance is not universal. Context matters. Culture matters. Power dynamics matter.
Benchmarking the Board of the Future
Beyond the paradoxes, the study also offers a practical takeaway on what an effective, profitable board looks like in the region. The findings suggest that banks perform best when they maintain a balanced level of independence; enough to ensure oversight, but not so much that it dilutes cohesion and slows decision-making.
Gender diversity remains a key driver of success, but only when it is accompanied by real influence. Having women on the board is not a symbolic gesture; it is a strategic necessity. The research shows that women’s representation accounted for more than 90 percent of the potential positive impact in profitability models. When women have both presence and power, they move the needle.
The Bigger Picture
Ultimately, this research is about more than banking. It is a reflection of what progress truly means in governance. For too long, reform efforts have been treated as compliance checklists; boxes to tick rather than systems to transform. But the findings suggest that how change is implemented may matter far more than what changes are made.
If boards across the MENA region are to drive real performance, they must move beyond symbolic inclusion and toward strategic inclusion, where diversity, independence, and decision-making power work together rather than apart. The next frontier of profitability may not come from digital innovation or new lending models, but from reimagining the boardroom as an engine of genuine value.
The Conversation We Need to Have
It might be time to start asking harder questions. Are our boards truly empowered, or simply well-decorated? Are our governance frameworks designed to fit our own realities, or are they borrowed from elsewhere? And most importantly, are we ready to see the boardroom not as a compliance requirement, but as a catalyst for transformation?
The answers could redefine not only how banks govern, but how they grow.
The findings discussed in this article are based on the research “Benchmarking Banks’ Board Characteristics and Profitability in the MENA Region” by Tarek Ibrahim Eldomiaty, Nourhan Eid, Nouran Tarek, Dina Youssri ElBatrik, and Mohamed Rashwan.
