Nepotism describes a variety of practices related to favoritism; it can mean simply hiring one's own family members, or it can mean hiring and advancing unqualified or under qualified family members based simply on the familial relationship. The word nepotism stems from the Latin word for nephew, especially the "nephews" of the prelates in medieval times. While attitudes toward nepotism vary according to cultural background, nepotism is a sensitive issue in American business. Many companies and individuals consider the practice to be unethical, largely due to its conflict with traditional American values of self-reliance and fairness. In Western societies nepotism raises legal concerns. Although U.S. laws do not specifically prohibit hiring one's relatives, studies show that between 10 and 40 percent of U.S. companies maintain formal policies prohibiting such a practice. Many of these anti-nepotism rules were instituted in the 1950s with the aim of preventing the hiring of incompetent male relatives of male employees. In the 1960s and 1970s the same rules applied but failed to reflect the change in the workforce as more women entered the job market; females were often the victims of these rules, however, and many were forced to quit. Nepotism is also tied to discrimination issues and pragmatic concerns. There is substantial debate over whether employers with any form of biased preferences for hiring, including nepotism, can even survive in the business market, ethical issues notwithstanding. On the other hand, approximately 40 percent of Fortune 500 firms are family-owned, and the success of these businesses can be viewed as an implicit endorsement of nepotism. Larry Singell and James Thornton identify four levels of anti-nepotism rules. They note that companies may institute policies that prohibit the employment of a current employee's relatives • anywhere in the organization,
• at the same facility,
• in the same department or work group, or
• in positions where one may immediately influence the compensation, promotion, or work situation of the other. Even if a company has a clearly stated policy, complications may follow in its enforcement. For example, the increase in dual-career marriages increased legal challenges to nepotism issues. Employees occasionally meet at work, socialize, fall in love, and eventually marry. In some cases, couples have had to decide which spouse has to quit, as company policy would not allow them to work for the same organization. Do practices such as hiring, or even not firing, family actually constitute discrimination? Further, even if there is no complication between the two individuals as a result of marriage, there is sometimes pressure from in-laws and even close friends of in-laws for favoritism in hiring. There appear to be differences in nepotism practices between family-owned businesses and publicly owned businesses. Most family-owned businesses simply expect family to be involved in the future, as do the in-laws who join the family. However, there are usually more formal rules for publicly held companies; these companies must therefore be cautious, since they are open to outside scrutiny over their hiring and promotion practices. ADVANTAGES
If practiced fairly (itself a contentious term in this regard), nepotism can be a true asset, Sharon Nelton suggests, citing the example of Thomas Publishing Company. In 1998 there were seven third- and fourth-generation family members working for the company. The third-generation president, Tom Knudson, encouraged nepotism among their independent sales contractors because he believed it resulted in high performance, stability, and long-term commitment. Chad Kaydo also writes that nepotism may be viable. For example, a top salesperson's relative may have many of the same qualities that make the representative successful. Recruiting family members can therefore boost both performance as well as retention. For...