It is the Favouritism shown or preferential treatment granted to relatives regardless of merit.
Nepotism is found in almost every walk of life, be it business, politics, religion etc.
In the arena of business, high degree of nepotism decrease morale and commitment level of other employees. They feel discriminated. However, few argue that, nepotism lends stability and continuity to the organization.
An example can be that a person at a position of responsibility uses his position to give job or undue advantage to his relative or close family member or even a friend.