Dr Zgheib holds a PhD in Economics and a Professional Doctorate in Civil and Environmental Engineering from Utah State University. In his current post at the Lebanese American University in Beirut, he lectures on business ethics, human resource management, entrepreneurship and business communications. He is also a regular consultant and moderator with private corporations around the world. 

Dr Zgheib’s academic work explores the intersection of Eastern and Western cultures. Struggling to find enough relevant materials on the subject of nepotism, he decided to conduct his own research with his students. A certain ambivalence characterises Dr Zgheib’s position on nepotism. His body of work asserts nepotism’s neutrality; it is neither good nor bad and is best approached as a widely accepted, culturally driven business practice.

We sat down with Dr Zgheib to discuss this duality, examine nepotism’s many cross-cultural expressions and address the point at which nepotism becomes corruption.

The Difference between Wasta, Nepotism and Corruption
Dr Philippe W Zgheib.

What sparked your interest in nepotism as an academic topic? 

While developing my book on business ethics a decade ago, I struggled to find any relevant source material on nepotism, so I started developing my own with the help of my students. We examined various family businesses and discovered that nepotism is by no means limited to Arab culture; it is a worldwide phenomenon.

My move to the Lebanese American University further solidified my interest in nepotism. Here, we have an institute dedicated to the family business studies. One-third of the course is devoted to family connectivity in business, which is intrinsically linked to nepotism. 

How do you define nepotism?

Most simply, nepotism is the hiring of relatives. That definition is objective – it does not imply benefit nor disadvantage, which is apt. 

“In Levantine Arab culture, we have a phenomenon known as wasta, which can be defined as ‘leveraging connections’…a common practice seen as a useful tool in promoting business success.”

Do definitions of nepotism vary between cultures? 

They do. In Levantine Arab culture, we have a phenomenon known as wasta, which can be defined as ‘leveraging connections’. That connectivity is often straight business connections used as references – a common practice seen as a useful tool in promoting business success.

However, when this wasta becomes so ingrained that it morphs into family favouritism or expresses itself through bribery, it becomes corruption.

How prevalent is nepotism?

First, let me address the prevalence of family business in general. In industrial societies – Europe, the US and Japan, for example – 80 per cent of businesses are family-owned or operated by at least some measure. They account for 50 per cent of the GDP. In other parts of the world, the economic contributions of family businesses are even more dramatic, and they employ up to 85 per cent of the active population. Therefore, regardless of geography, a significant amount of hiring is conducted by families, even if not directly the result of family referencing.

Our graduates are indicative of nepotism‘s prevalence, at least in this part of the world. Those that do not leave the country to pursue professional opportunities as expatriates often fail to find a job if their employment is not pre-guaranteed by a family connection.

In our culture, family business referencing is the number one guarantee of employment after graduate studies – that’s how relevant it is. 

How can family businesses ascertain whether or not wasta is having a negative impact on their business?

Symptoms are culturally specific: East versus West, collectivism versus individualism and even long-termism versus short-termism all play a factor in how nepotistic actions impact a business.

In my experience, nepotism tends to become damaging over time, as the business passes from one generation to the next. Often, first-generation and second-generation nepotism contributes to the growth of the business and the legacy of the founder; it’s often a tool to maintain their value system.

By the third generation, as the extended family grows, nepotism can become problematic. The family relationships which once gave the business resiliency can begin to pull it apart. Nepotism is a factor in the often referenced ‘failure of the third generation’.

There are mechanisms such as governance structures that work to mitigate nepotism‘s adverse effects, and these should be ingrained into family counsels, advisory boards and consultancy arrangements. 

Beyond these tools, however, the dilemma can be one-way. In other words, these problems become entrenched, and it’s difficult to realign. 

Are corruption and nepotism inherently linked or can they be disassociated?

The inherency of a link to corruption is a more Western angle on nepotism; it’s a free-world cultural tangent to the family-engrained value system. Having familiarised myself with Western and Eastern business norms, I still consider nepotism to be a shortcut to what we call ‘business referencing’. It’s wasta, and wasta is good until it starts to bend the law or circumvent ethical standards. 

Nepotism becomes corruption when there are political or religious allegiances involved. In these guises, nepotism is a tool to discriminate and perpetuate social immobility – a disadvantage to the qualified. This is when the practice begins to have legal implications – when business wealth starts to transform into political power. 

Having said this, in a cultural context, and in oriental cultures especially, nepotism is a strength and a way of life.