The issue with pure capitalism is that it reduces people's interactions to their economic value but some people do not have economic value, or have little economic value and no power to redress it. So capitalism can be efficient but can also be efficiently cold hearted.

Nepotism is only an issue where owners define it as an issue. Obviously the workforce at large stands to benefit from meritocracy but so do shareholders. In a free market, inadequate appointments due to nepotism should put a company at a disadvantage. But compare that with a family farm where the owners (shareholders) might prefer nepotism (appointment of a son/daughter to management) rather than opening the role to the job market. Few people object to this small scale nepotism, but should they object if shareholders of a large corporation wanted to do the same? Isn't it their money after all? The chief issues with nepotism are when it's done against the wishes of the owners of the company. But this is increasingly difficult with shareholder approval of board members and so on.

Obviously nepotism into monopolistic companies is a problem because of lack of competition but this only joins all the other problems already caused by monopolies.

In a healthy capitalism, competition is maintained. And if that's done then the risks presented by nepotism are diminished because poor appointments ought to lead to poor results.

Ironically, it's in extensive socialist state monopolies that nepotism is most dangerous primarily because of the decreased market competition.