[dieterrams]

Suppose it is clearly the wrong business choice for your friend's company to acquire your company.

Suppose a friend promoted you over someone else who was vastly more qualified, and worked much harder than you for that promotion.

Etc.

Now suppose you're the one getting screwed over instead of the friend benefiting.

It's not nepotism if friends benefiting is merely a side effect of making the best business (or whatever) decision. But if that decision process is subverted in order to benefit friends, negatively impacting other stakeholders that you have a responsibility to, creating a work environment which is deeply unfair and unmeritocratic, etc., then that is absolutely a problem. This should be pretty obvious.

[AndrewKemendo]

The problem with that approach though is that it's never clear cut.

Maybe someone is "vastly more qualified" technically but doesn't have any business sense or some other quality that is unknown to the rest of the group. There were many times where I thought that the wrong person was promoted or hired, to find out later that they were actually a good fit. Were they the PERFECT fit? I don't know, but there is value in having history with someone to have a higher confidence they will meet the minimum standard.

There's always someone or some group that is "better" for a job or acquisition or whatever based on some metric.

It's a real problem in my mind for "market information." Generally people go for a product they know, that can fit the bill, over a product they don't know that might be better. Same goes for hiring and personnel etc...

[dieterrams]

I was merely giving you the clearest possible examples, since you seem to be confused about what possible harm nepotism could cause.

Sure, in some situations, it may be ambiguous who is actually the better pick. For argument's sake, let's assume such choices are ALWAYS ambiguous. If you're consistently picking your friends in those situations, you're nevertheless creating a perception of nepotism (read unfairness) throughout the rest of the company, which will minimally be harmful to morale. So yeah, even if you're not being particularly nepotistic, guarding against the perception of nepotism is still important.

My bigger concern, however, is that it's very easy for someone to rationalize nepotism when they're a beneficiary.

I really don't know enough about the specifics of your situation to know if nepotism is much of a concern, but I definitely don't think your friend's "nepotism is GREAT" stance is worth taking seriously.