Its not what you know, but who you know? Its not what you know, but the color of your skin, your gender, and your sexual preference? If my grandpa started a business that my father took over should I not be allowed to run it? If my brother has a good job and the companies hiring and he puts in a good word for me should I not be hired? That is unless I'm black and they need to fill their minority quota? I try not doing work with family or friends because if there is a problem someone always feels screwed over.
This isn't a complete characterization of the problem the nepotism can be. It's not who does or doesn't or would or shouldn't have an advantage, per se. This becomes clearer once you pause and realize that governmentally speaking, nepotism is NOT ILLEGAL, in and of itself.
There are really two almost unrelated components or aspects to why nepotism is seen as a negative. One is the basic sense that "it's not fair" that people feel, whenever they are involved in an endeavor which was presented to them initially as a straight up competition of competence and skill, only to find that it really isn't after all. The other, is the practical problem, where someone who is actually BAD for the endeavor is promoted to a position of control within it because of who they happen to be related to. That's bad for the business. But neither is ILLEGAL in most cases.
Nepotism only rises to the level of being a serious disruption and distortion of an entire society, and hence something that the society would logically address through legal action, when the individuals involved happen to have come to be in positions which affect the entire society. Thus we DON'T allow the "Presidency" to be turned into a family possession (that would change it to being a Kingship). In other instances, where a particular business has been so "successful" that it has become essential at the core of society, the society will logically respond by demanding to have a say in how it is conducted.