Schadenfreude, known as the pleasure derived from another’s misfortune, has been widely characterized as a counter-normative and antisocial emotion in organizational contexts, particularly when third-party observers witness workplace mistreatment. Prior research largely assumes that schadenfreude undermines moral concern and perpetuates harm toward victims. Drawing on appraisal theory and moral emotions research, this paper challenges that unidimensional view by distinguishing between two self-conscious moral emotions that can emerge following schadenfreude: shame and guilt. We propose a first-stage moderated mediation model in which initial schadenfreude elicits moral reflection, but whether this reflection produces shame or guilt depends on observers’ attributional appraisals (locus, stability, and controllability). Shame, arising from internal, stable, and uncontrollable attributions, is expected to promote withdrawal and antisocial behavior toward the victim, whereas guilt, arising from internal, unstable, and controllable attributions, is expected to motivate reparative, prosocial behavior. By disentangling shame and guilt and identifying the attributional conditions under which each arises, this research reframes schadenfreude as a morally consequential emotion with both harmful and restorative potential. In doing so, it advances theory on third-party reactions to mistreatment and offers new insight into how cycles of workplace mistreatment may ultimately be disrupted.