Abstract Ethical leadership has found the centre stage in the academic and organizational world. The study contributes to the body of literature by exploring the concept of ethical leadership and its various aspects, which influence other critical employee outcomes in an empirical manner, such as job satisfaction, organizational commitment, and job embeddedness. A moderated mediation paradigm is developed and examined, where ethical climate, power distance orientation, and the social distance of leaders are defined as moderators, and psychological empowerment appeals are defined as mediators in the relationship between ethical leadership and employee outcomes. The framework is grounded in social exchange theory, which offers theoretical support for the proposed relationships. Utilizing a quantitative research methodology, data were collected from 450 employees employed in family-owned businesses in Pakistan. The study employs SmartPLS for structural equation modeling (SEM) and adopts a mixed-methods approach to enhance robustness. Results confirm that ethical leadership has a significant impact on sustainable employee outcomes and psychological empowerment. Additionally, the concept of psychological empowerment has been viewed as mediating the relationship between power distance orientation and leadership social distance, as well as serving as a significant moderator of the effect of ethical leadership on employees.

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*Corresponding author: saba.amin@autonoma.cat

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