If there is one thing everyone knows, it is that nepotism is bad. Very bad. It
promotes inefficiency and waste, rewards incompetence and undermines incentives
for those not born with the right set of genes. Nepotism favors rich over poor,
white over black, men over women. If people did not selfishly insist on keeping
all their goodies in the family, the world would be a fairer, happier and more
productive place.
The trouble with this litany of supposedly incontrovertible
facts is that none of them is true. How do I know this? Because I have spent the
last four years researching and writing a history of the practice.
Nepotism is best understood as the means by which people pass on
knowledge,
skills and values. |
It is
notoriously difficult to change people’s minds about a deeply ingrained
prejudice. Yet nepotism’s bad reputation is just that: an irrational prejudice,
based not on facts but on ignorance, ill will and ideology. What is more, the
evidence for it is largely anecdotal. There have been studies of family
succession in business, however, and since most nepotism happens in that sphere,
the health of family businesses is a good indicator of whether nepotism is as
bad as people say it is.
Does nepotism promote bad management? Not really. In
fact, according to a recent study in the Journal of Finance, family firms
exhibit significantly better accounting and market performance than their
nonfamily-run counterparts. Family managers plan better for the future, exhibit
greater concern for product quality, and view their firms as a legacy to pass on
rather than a source of wealth to consume in their own lifetime. The authors
found that family firms are about 7 percent more profitable and 10 percent more
valuable than nonfamily firms. Among today’s larger family-run companies are
Nordstrom, Wrigley, Comcast, NewsCorp, McGraw-Hill and Ford Motor.
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