Nepotism in the workplace

At work, my manager has just employed her manager’s daughter.
If it was a holiday job I would have less of a problem with it, but it is a permanent position. Our employment place rules are that a family member cannot report to a family member, which seems good enough for some, but not for me.
I think there is huge potential for conflict of interest, as already goes on with a married couple at my work, the husband of which is the director of one area. The wife has become manager of a very large department in less than 5 years, many other managers not challenging comments and actions, because they are scared that things will get back to the director (which has happened on numerous occasions).
So anyway, my question is: Does anyone have any really good peer reviewed journal articles that deal with these kind of ethics; use of power, nepotism etc.

No, but Robert Townsend’s classic (and iconoclastic) book on business management, “Up the Organization”, has a section on nepotism, viewing it as one route to inevitable business death for a company. He argues that it doesn’t matter if it isn’t happening; if it even looks as if it could be happening, “the smell of it will scare off or turn off” the people the company needs the most.

Unfortunately, unless you happen to be in a high enough management position to ban it, Townsend has no real advice except not to work for companies that appear to practise it … which isn’t exactly helpful.