[mschuster91]

It will be that way inevitably as an organization grows, usually it's an investor requirement to prevent outright nepotism hires or discrimination. No one cares too much for the first few dozen employees but anything larger usually will come with "ffs go and implement at least some basic hiring standards to reduce the legal risks".

[frognumber]

For what it's worth, in the US, the legal risks are negligible.

So long as you don't discriminate against a protected class, you're usually good to go. Nepotism is bad business, but it isn't illegal.

Investors do care about bad business decisions, so it makes sense for them to require good hiring practice. However, if a sole proprietor -- or a business with all its shareholders -- decides to hire inept cousin Vinny to keep him from idling about the house, that's usually legal. In a family-run business (where there is a paper-thin wall between business and personal finances), it may even make financial sense.

This differs from almost any other jurisdiction in the world.