Merits are fundamental to promote an employee, but I would like to know what kind of merits you are referring to, as they can be achieved for different reasons. In some countries in some cases different merits are taken to give a promotion.
Leadership ability is a very valid point to take into account, this is surely the result of a good performance in the employee's functions and an example to follow. It should be taken into account for a promotion.
I like your point of view, and it is something we have evaluated, "length of service, educational achievements and quality of character" this is integrated into the employee's performance to be evaluated. When these are taken into account they are very likely to be right when choosing a promotion.