There’s a big shuffle happening at Zenefits today — with Zenefits CEO Parker Conrad exiting the company and COO David Sacks taking over. Conrad is also stepping down as a director of the company.
In an email to employees, Sacks noted that compliance issues that have plagued the company contributed to Conrad’s exit. Zenefits has hit significant turbulence, including missing revenue targets according to a Wall Street Journal report, and also running into issues with regulators.
“I believe that Zenefits has a great future ahead, but only if we do the right things. We sell insurance in a highly regulated industry,” Sacks wrote in an email to employees. “In order to do that, we must be properly licensed. For us, compliance is like oxygen. Without it, we die. The fact is that many of our internal processes, controls, and actions around compliance have been inadequate, and some decisions have just been plain wrong. As a result, Parker has resigned.”
Zenefits has also added three new board members: Valor Equity Partners managing partner Antonio Gracias; TPG managing partner Bill McGlashan; and PayPal co-founder Peter Thiel.
Regulatory issues have plagued the company, as has been reported by BuzzFeed. Zenefits allowed unlicensed brokers to sell health insurance, leading to at least one commissioner to investigate the company in Washington State, according to a BuzzFeed report. Most recently, BuzzFeed reported 80 percent of the company’s deals in Washington State were done by unlicensed brokers.
“David is a strong leader who will take Zenefits to the next stage of development, as it evolves from a startup to a large-scale national leader,” Conrad said in a statement. “I am immensely proud of the organization we have built and the industrywide impact we’ve had but recognize that our company’s management infrastructure and policies haven’t kept pace with our meteoric growth. Elevating a strong management hand with successful experience and impeccable credentials is without a doubt in the best interests of the company at this time.”
The company also appointed Josh Stein, a former federal prosecutor and a VP of Legal, as Chief Compliance Officer. Stein will continue to oversee a review that Zenefits began last year to assess the company’s operations related to broker licensing and compliance, the company said.
Sacks, the former CEO of Yammer, is now in charge of another billion-plus-dollar company (with his last company selling to Microsoft for $1.2 billion). Zenefits previously raised $500 million at a $4.5 billion valuation largely on its highly aggressive revenue projections.
“In order to be a great company, integrity must be at the core of what we do. We must have integrity in our business practices, compliance obligations and internal processes,” Sacks wrote. “We must have integrity in our product. We must have integrity in our data and infrastructure. And we must have integrity in the way we treat each other.”