Summary: Creating a Leadership Capital Index

It is axiomatic to say that leadership matters—to employees, to customers, to investors. But a large gap persists between recognizing that leadership matters and rigorously assessing leadership capital. Many thoughtful and helpful studies have been done to inform investors about how to evaluate leadership—but their advice tends to be both fragmented and narrow.

To gauge leadership capital, my colleagues and I offer an index based on two domains and ten factors. One domain assesses the competencies of pivotal leaders throughout an organization, while the other assesses the ability of leaders to institutionalize leadership. Combined, these factors constitute a leadership capital index that will help investors make more informed decisions about intangible value and long-term financial success. In addition, a leadership capital index will help those charged with managing risk, governance, social responsibility, and reputation keep up with their responsibilities. Part 2 discusses the five elements of the individual domain and Part 3 reports specific indicators of the five elements of the organization domain.