cronyism

[kroh-nee-iz-uhm]
noun
the practice of favoring one's close friends, especially in political appointments.

Origin:
1830–40; crony + -ism

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World English Dictionary
cronyism (ˈkrəʊnɪˌɪzəm)
 
n
the practice of appointing friends to high-level, esp political, posts regardless of their suitability

Collins English Dictionary - Complete & Unabridged 10th Edition
2009 © William Collins Sons & Co. Ltd. 1979, 1986 © HarperCollins
Publishers 1998, 2000, 2003, 2005, 2006, 2007, 2009
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Etymonline
Word Origin & History

cronyism
1840, "friendship," from crony + -ism. Meaning "appointment of friends to important positions, regardless of ability" is originally Amer.Eng., from c.1950.
Online Etymology Dictionary, © 2010 Douglas Harper
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Example sentences
Her austerity goes down well with jaded voters tired of cronyism and
  extravagance.
But matters are worse in universities, where patronage, cronyism and secure
  tenure are the rule.
Bringing businesspeople into politics can also produce corruption and cronyism.
Cronyism has also led to a proliferation of courses and departments.
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