Editorial: Nepotism main cause of wrongdoing

A recent academic study suggests that nepotism is the main cause of wrongdoing in Saudi business and the civil service. The noun “wasta” is used but this is not entirely correct, because the word can have the broader meaning of having good connections and of knowing the way around the system.
The research was carried out by Naif Arab University for Security Sciences. Researchers surveyed a wide range of organizations in the Kingdom charged with identifying and stopping corruption. They found that the second most common area of wrongdoing was misuse of power followed, in only third position, by bribery, which is popularly considered the most common form of corruption.
Yet, is nepotism really automatically wrong? Western business certainly seems to think so. There are formidable arrays of employment law which insist that a job must be awarded to a person on merit alone. Any family connection, for instance, is almost certain to stop a candidate from being employed. Perversely this is because however well he or she is suited for the job on offer, merely to employ them would make people assume that they had been appointed as an act of favoritism. The contradictions are already clear.
Moreover, the process of short-listing, interviewing and choosing from among complete strangers is often fraught with risk in companies of every size in Europe and North America.
Those whose job it is to make selections have CVs — rarely totally accurate guides to a candidate. They can also have background research and references that have been taken up. But in the end, the managers who sit alongside a human resources professional to select a successful job applicant, are working on a combination of instinct and guesswork. Though the HR professionals do not like to own up to bad news for their profession, a significant number of new hires turn out to be duds. Companies then have the bother and expense of letting an unsuitable person go and restarting the hiring process all over again. Otherwise they live with their mistake and risk the commercial consequences.
Now one thing that nepotism can, but does not always, bring to the party, is a preexisting knowledge of a job applicant. Candidates advanced through family or social connections are a lot easier to assess. It is easy to see how hard they worked for their qualifications. It is easy to establish their approach to work and their level of commitment. Ideally someone who comes to a job interview through "wasta," should be rejoicing in their good fortune in having the connections to get them that far. They should certainly not be sitting back arrogantly assuming that the interview process is a mere formality and that they are in fact the certain beneficiaries of a “done deal”. Nepotism is only useful if it ensures that those it produces as potential hires, are then judged on their capabilities. Wasta that brings about the employment of totally unsuitable individuals, however good their connections, is absolute madness. It is what, indeed, has given nepotism such a bad name.
Looked at this way, nepotism could actually be seen as a useful tool for HR professionals. However it is hard to see many of them admitting the soundness of the argument.
Nor is sympathetic handling of nepotism the only shortcoming of modern business ethics. There has recently been a slew of insider-trading cases in both North America and Europe. Crime can clearly be established if a stock or share transaction takes place as a result of privileged information not yet generally released. But what about rumors, or sensible market analysis? If an investor discovers that Apple has secretly booked prime advertizing time and space on such and such a date, then is it insider-trading to buy that share in anticipation of a new product launch which will see share values soar? Po-faced US judges have ruled that it is. Yet there are inconsistencies. There are, for instance, investment companies that make their money from “shorting” shares — selling borrowed shares, in the belief that the price is about to fall and the shares can be bought back cheaply, (and returned to the institution from which the shares were borrowed). Such trades can produce big profits.
Yet the very act of selling the shares in large quantities, especially if it is done by one of the big well-known short-sellers, is extremely likely to drive down the share price, giving almost risk-free returns to the short investor. This clearly dubious investor technique has not taken off in the Kingdom. On the other hand, this new research indicates that nepotism is still around if not flourishing. Compared with share price manipulation, nepotism looks an extremely mild infringement of modern business mores.