Seriously? What kind of stupid design decision is that?
Why is that stupid? The idea is that your allies are inspired when they can see a leader in their midst. When you can't see him and don't know where your leader has gone or what has happened to them, that inspiration fades.
An aura would be stupid - why would you lose morale just because your leader was standing X feet away?
It requires line of sight, not a distance check (although I image beyond a certain distance you can no longer see your leader, which is probably a product of your sight score). It even flat out says Leadership provides a boost to allies "that see you" when you examine the tooltip, and the buff icon even states
"Leader in sight!" (not "Leader in range!").
