Faction leaders feel really dumbed-down to me. They don't really serve any purpose, and while you can kill or capture them, they're no different from any other hostile pawn. Here's my suggestions to make them have more significance:
- Killing a faction leader results in a relationship penalty with said faction, perhaps in the area of -25. The same penalty is incurred if a faction leader is sold into slavery.
- Releasing a faction leader results in a relationship gain of around +25. Like usual, you cannot improve relations with a pirate faction.
- When holding a faction leader prisoner, the faction may contact you offering a ransom payment. It may be in silver or items.
- When a faction leader is being kept prisoner, the faction may attempt to mount a rescue mission. They will flee once the leader is broken out of prison, and are less likely to flee when sustaining heavy casualties.
- Faction leaders have superior equipment and skills to their regular pawn counterparts. They are the leader of their faction after all.