In most business environments, some companies focus on business opportunities created by government budgetary incentives and are able to target specific groups, whilst securing income. However these initiative are often halted when governments change and a new political policy environment is established.   Whilst these companies that provide goods and service should do so in a transparent environment, incidents of nepotism are frequent. Companies generally find themselves faced with dynasties within various industries that may cause one company to constantly receive contracts and more business, than another. In the literary and performing arts innate creativity may be accepted while in the fields of business, law and medicine, family and friends customarily pull strings. This may be acceptable in some cultures where grooming relatives for family-run business is a tradition.

Corruption, Cronyism and Nepotism has long been the focus of studies on developing countries and today there is growing academic and policy consensus that corruption is often high and costly in low-income developing countries. According to research conducted by Michael Collier (2000), the Caribbean has a real political corruption problem that is significantly retarding the region’s development. Comparatively, in developed countries like the US, the list of corporations and business leaders that have been involved in legal and ethical wrongdoing, including nepotism, is long – Enron, WorldCom, Rite Aid, Sunbeam, HealthSouth, Global Crossing, Arthur Andersen, Ernst & Young, ImClone, KPMG, JPMorgan, Merrill Lynch, Morgan Stanley to name a few.

Nepotism has been a barrier to skills, careers and talent for decades. The Oxford Dictionary defines nepotism as “the practice among those with power or influence of favouring relatives or friends, especially by giving them jobs”. Many companies after a period of misguided growth due to favoritism normally find difficulty progressing towards profitability once placed within a competitive marketplace.   Dependent on the number of companies that are part of this cycle of cronyism, this practice can have an impact on economic development, particularly in small to medium size developing countries.   In this regard, a cause for concern arises for new Governments as to how to eradicate corruption whilst maintaining economic prosperity of a country.

Transparency International in a survey of 3000 businesses in May-June 2011cited that a quarter of these companies lost their business because of corruption and the payment of bribes.  That problem they reported, is most acute in export-oriented economies like Malaysia and Mexico.

In 2013 at the World Economic Forum, world leaders identified the greatest impediments to conducting business in developing countries, and of course, corruption was cited as the biggest hurdle in Europe, Asia and Africa.

Nepotism impedes companies from realizing their true potential for success. Theorists in the field of Commerce believes in free markets, as they are better for business and allows for all to compete fairly for new development.   In this regard, this blog outlines some approaches that companies could adopt to recover from, or to avoid nepotism, cronyism and favoritism:

  1. Join lobby groups and associations that aim to lobby Government for preferential laws and regulations, codes of business practices and enforcement.
  2. Businesses should be aware of international standards and procedures as well as the domestic laws, particularly relating to managing people;
  3. Create self-regulatory industry associations; this will remove decision making powers for the industry from the Government to the stakeholder;
  4. Explore joint venture, Public/Private Sector Partnerships (PPP) activities with the Government and Parastatal organizations;
  5. Promote corporate social responsibility and philanthropy, this will build public awareness while getting influential stakeholders on your side, a great example is participation in environmental clean-up campaigns;
  6. Choose to accept bureaucratic delays and rework delays into your company’s risk planning;
  7. Claim ownership/buy-in to national foreign direct investment activities and commit to doing your part to ensure a dynamic economic environment for all companies/organizations to thrive;
  8. Participate in initiatives with Civil Society and Government to explore collective approaches to mitigating corruption;

Executives should also remember that the exigencies of the present can obscure the imperatives of the future. In the long term, corruption erodes a company’s credibility, and competitiveness, along with the trust of customers and employees, thereby limiting opportunities to make profits. By staying silent, leaders must ask themselves: are poisoning the pool from which we all drink?