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Regardless of qualifications, I wouldn't expect anyone to accept me just because they knew me... it's an unfair advantage. The example you listed--that nearly all of the employees traced back to one person--strikes me more as a disgusting injustice than as any sort of justification for it.
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How is it an injustice if you're hiring from a pool of candidates who are nearly identical? I don't think it's right if you hire somebody with lesser qualifications, but if there are no significant differences, you'd definitely hire the person you know. Like Britty said, you still have to prove that you deserve the job once you get it though.