Using large-scale surveys and register data from Denmark, we show that firms led by neighborhood CEOs – defined in terms of physical proximity to the company and personal values - exhibit a better working environment, as perceived both by a regulatory authority and firms’ own employees. This finding is stronger when the CEO’s and employees’ children attend the same school, pointing to social interactions as a channel for the result. At the same time, firms led by neighborhood CEOs exhibit a higher level of profitability, which suggests that these CEOs do not tradeoff shareholder returns with employees’ welfare.

Using large-scale surveys and register data from Denmark, we show that firms led by neighborhood CEOs – defined in terms of physical proximity to the company and personal values - exhibit a better working environment, as perceived both by a regulatory authority and firms’ own employees. This finding is stronger when the CEO’s and employees’ children attend the same school, pointing to social interactions as a channel for the result. At the same time, firms led by neighborhood CEOs exhibit a higher level of profitability, which suggests that these CEOs do not tradeoff shareholder returns with employees’ welfare.