Subject matter of this thesis is leadership ethics. First part of the work offers closer look at the concepts of ethics and leadership, as well as as an account of their mutual connection. Emphasis is herewith placed on importance of business ethics in considerations about ethical leadership. Basic norms governing the very idea of leadership are presented throughout the paper, whilst indicating ethical problems and challenges encountered by people on leadership positions through daily business management. Second part of this thesis consists of research, conducted in order to determine to what extent superiors are viewed as ethical by their employees, as well as to establish to what extent their respective companies apply ethics in business management. Subject matter of said research is exploration of the following hypothesis: superiors from Republic of Croatia exhibit insufficient knowledge and application of leadership ethics, leading to a breakdown of trust and confidence in company ethics, ethics of their superiors and work environment by employees. Objective of the research are: 1. To determine employee’s attitude towards business ethics; 2. To determine differences between respective superiors regarding their business ethics application, taking the respective company employee counts into consideration; 3. To define characteristics of the ethical leader. One of the most important conclusions to be drawn from this research is that ethics application in business management is on the increase in Republic of Croatia, and, furthermore, that ethics is instrumental to successful company management.