A pervasive feature of Korean society is nepotism. Blood ties, alumni groups, and territorial ties are major mechanisms of nepotism in Korean society. The purposes of this study were (1) to analyze the negative effects of nepotism on the development of Korean society, (2) to explicate the psycho-social bases for nepotism, and (3) to explore an alternative way of dealing with nepotism. Empirical data regarding nepotism were analyzed. Exclusiveness of nepotic ingroup and sense of deprivation of isolated group were discussed as the negative effects of nepotism. The psycho-social bases of nepotism were explicated from familism and collectivist-individualist perspectives. Task oriented value systems and behavioral norms were suggested as an alternative to the personal realtionship based on nepotic network. Decentralization and empowerment were proposed as an alternative to nepotism. Development of a new and more inclusive community ethos was discussed.