Otherwise, what are you really mitigating by refusing to hire your CTO's nephew? If he's a strong candidate, it's not pathological and calling it nepotism is pointless at best. Otherwise if CTO's nephew turns out to be a weak candidate and is let go then again, it's completely normal. If CTO's nephew is a bad hire, yet he's retained, then it's nepotism.
"As the hiring manager, I turned him down because of the lack of programming experience. I was overruled by our CTO."
What's the sample size?
> supports that the CTO was a better judge of the candidate.
No, it doesn't, because the hiring manager's choice never got a chance to show what they could do. Besides, the fact that the nepotistic hire worked out could have been just dumb luck. After all, hiring is a crapshoot, especially hiring interns.
Regardless, this was clearly nepotism, and the question isn't whether the CTO could judge the candidate, the question is whether favoritism was shown toward a family friend, which is indisputably the case.
No definition I've come across requires the candidate perform poorly, where have you come to this conclusion?