Founder of controversial group reprimanded

An ethical lapse by the co-founder of GiveWell, a controversial nonprofit watchdog group, has landed him a demotion and dock in pay from the group’s board of directors, The New York Times reported Jan. 8.

After submitting a question to his own blog under an assumed name, then answering it in a light favorable to GiveWell, Holden Karnofsky was demoted from executive director to program officer and must use $5,000 of his salary to attend a professional development course.

Karnofsky has called his actions “a horrible lapse in judgment,” the Times says.

The research group was founded by two young former hedge-fund employees and takes a new approach to the simple question: “Where should I donate?”

Karnofsky and Elie Hassenfeld, both 26, left the finance industry to create a new kind of charity.

Taking a “skeptical” approach to philanthropy that has drawn both admiration and criticism, GiveWell, which was founded last year, evaluates and ranks the effectiveness of nonprofits working within a given field.

Controversy has arisen in response to GiveWell’s hard-line approach to philanthropic effectiveness. It claims to be the first organization of its kind to publish publicly charities’ internal reports and to rank them based on activities and outcomes, not just finances.

“Rating a charity by how much it spends on administration is like rating a movie by how much it spends on actors,” says Hassenfeld.

“There isn’t any other kind of business we expect to do great work while skimping on administrative costs – administrative costs mean people, planning, technology, and all the things you need to crack tough problems,” he says.

The truly valuable information on a charity’s impact, Karnofsky says, will become available to individual donors, who collectively give six times more than all charitable foundations combined, only when major funders begin sharing their decision-making processes.

GiveWell is an attempt to bridge that divide.

Karnofsky and Hassenfeld were prospective donors frustrated with the inaccessibility of data illustrating an organization’s impact.

So were the six former co-workers from whom they raised over $300,000 for The Clear Fund, GiveWell’s financial backer.

GiveWell uses The Clear Fund’s grants of $25,000 to $40,000 to gain access to the internal reports of the charity applicants upon which it bases most of its research.

A report the group released in early December on organizations that work to save lives in Africa credits Population Services International with more life-saving impact than the 50 other major charities surveyed.

Karnofsky and Hassenfeld have also set out to inform the average donor about which organization helps the most disadvantaged adults find jobs in New York and which does the most to alleviate global poverty.

Education and child care are also on the slate of causes for future research, and the GiveWell is soliciting suggestions for even more.

But GiveWell has been criticized for the unorthodox nature of its analyses, which might discourage givers, and the tone of its blog, which had been critical of some nonprofits, foundations and donors.

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