Ok. So the problem is that designing systems with accessible back-doors for nepotism is a larger hit to the effectiveness of the industry than if there were simply blatant nepotism itself, and systems weren't compromised by third parties.

Is this correct?

Yes; that's my current thesis, anyway.

In your (admittedly non-exauhstive) experience, in what specific ways is the industry harmed?

Because nepotism is being hidden behind a cloud of general inefficiency and unaccountability, systems are designed to be inefficient and unaccountable. This means that plenty of other failure modes ride in on the same train - HR interviewing processes become a nightmare, reporting and recording instances of harassment, fraud, etc. become fraught with roadblocks and potential backlash, and internal and outreach hires based on specific recommendations / vouchsafes become a needlessly complicated process.