Nepotism is preferential hiring of relatives and friends (i.e. hiring a brother in law or nephews and nieces), even though others might be more qualified for those positions. Under any circumstances, whether hiring for a new job, in politics, sports, religion and other activities, individuals can demonstrate favoritism to family members. From an organizational perspective, this is particularly unfair for job applicants that may miss out due to being unable to compete when a relative applies for the same role as them.
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Ancient Indian philosopher Valluvar condemned nepotism as both evil and unwise. It is criticized by several philosophers including Aristotle and Confucius. Still today it is seen as unethical, both on the part of the employer and employee.
In teams where a related individual or individuals have been hired, the motivation and commitment from non-related employees decrease. When an individual fills a superior position through nepotism this also generates significant negative attitudes. This is especially true in situations where the promoted individual is notably underqualified or underprepared for the role.
In the private sector, nepotism is not illegal. Although in the US companies have an obligation under the Sarbanes-Oxley corporate governance law to disclose 'relationships that may present actual or potential conflicts of interest that may affect officers'. So whilst it is not inherently illegal, managers are obliged to hire and promote relatives with caution and with justifiable reasoning.
Anti-nepotism laws or nepotism rules don't necessarily legally exist but they still remain key to promoting an equal and fair workplace and to help organizations avoid accusations of nepotism. Hiring or promotion of family members over other better candidates is wrong and will eventually prove itself to be ineffective.
For truly transparent companies, the issue of nepotism should not be a concern. With robust mechanisms to mitigate potential conflicts of interest, discrimination, and other risks caused by nepotism, there is protection for all involved to prevent unfair and unjust practices. In some ways, it is now in fact more difficult for family members to succeed when working in the same company as relatives due to this additional scrutiny. This is particularly the case in small businesses.
Nepotism in the workplace will inevitably prevent opportunities for diversity in the workplace. Diversity is important for any business, as when companies hire employees with a range of skillsets, this enables individuals to truly learn from each other. Consequently improving morale and team-building exercises.
A lack of diversity results in a stagnation of producing new ideas. Companies without a diverse workforce will struggle to grow and innovate. It is our differences that contribute to producing unique and effective developments. Moreover, these companies cannot claim to be diverse and against discrimination, when they continue to hire with bias and from within. Even a family business needs opportunities for expansion and new thinking.