Market perceptions of leaders move share prices, a new report from Deloitte Touche Tohmatsu Limited (DTTL) "The Leadership Premium" showed. Based on a survey of leading market analysts in the United Kingdom, the United States, China, India, Japan, and Brazil, the report finds that the quality of senior leadership - including core capabilities as well as personal qualities such as honesty and integrity - has a direct, and measurable, impact on analysts' assessments of whether companies have been successful and will be successful in the future. "With this research we wanted to put a quantitative metric on the effectiveness of leadership, to help businesses understand the impact that leadership can have on their performance and market value," said Margot Thom, Managing Director, Global Talent and Human Capital Consulting Leader, DTTL. "This report uncovers a tangible metric that has a real impact on the long-term shareholder value of organizations, which we hope will set out a compelling vision of effective leadership for the future." According to the report, the analysts who said the quality of leadership affected their valuations awarded, on average, a premium of 15.7 percent for particularly effective leadership - and a discount of 19.8 percent for its opposite. To that end, the gap between the value of a company with good leadership and that of a company with weaker leadership could be more than 35.5 percent. The report indicates that analysts look for three core components when assessing an organization's leadership strength: • Strategic clarity - a clear vision of what the organization needs to achieve. • Successful execution - proven ability to meet objectives. • A culture of innovation - commitment to enterprise; an environment for ideas. In addition, analysts look for two attributes that support these components: effective corporate governance and effective leadership characteristics. Simon Holland, DTTL Strategic Change and Organizational Transformation Leader, said: "To succeed in the long term, an organization needs a clear and inspiring vision of where it wants to be and the resources, ability, and drive to get there. It also needs a culture that supports new ideas and that fosters a strong sense of belonging and purpose. These conditions aren't developed accidentally: effective leaders design them in, and analysts recognize that." A separate study listed five golden rules of best corporate governance practice, they are: - Ethics: a clearly ethical basis to the business - Align Business Goals: appropriate goals, arrived at through the creation of a suitable stakeholder decision making model - Strategic management: an effective strategy process which incorporates stakeholder value - Organization: an organization suitably structured to effect good corporate governance - Reporting: reporting systems structured to provide transparency and accountability An organization can ensure that a state of good corporate governance exists, or is brought into being if its existence is uncertain. It takes the view that there is an over-riding moral dimension to running a business and that the standard of governance will depend on the moral complexion of the operation. The approach developed is based on the belief that the business morality or ethic must permeate the entire operation from top to bottom and embrace all stakeholders best corporate governance practice is an integral part of good management practice also permeating the entire operation, and not an esoteric specialism addressed by lawyers, auditors and sociologists The essence of success in business is having a clear and achievable goal, having a feasible strategy to achieve it, creating an organization appropriate to deliver, and having in place a reporting system to guide progress.
