Zenefits, a software startup valued at $4.5 billion, said on Monday it had replaced founder and Chief Executive Parker Conrad and appointed a new leader for the troubled tech company. Josh Stein, a former federal prosecutor and vice president of legal, will oversee the review as chief compliance officer. The company has also added venture capitalist Peter Thiel to the board (and Conrad remains on the board).
"Our culture and tone have been inappropriate for a highly regulated company", Sacks wrote. "We are committed to having robust administrative and technical controls in place that ensure strict and total compliance".
"I believe that Zenefits has a great future ahead, but only if we do the right things", read Sacks's blog post. David Sacks, the company's chief operating officer and formerly cofounder and chief executive of Yammer, is taking over as the Zenefits' new chief executive.
On Monday, citing regulatory compliance problems that had been unearthed by BuzzFeed News, Zenefits announced a leadership overhaul.
He said that in December, the firm - which manages everything from payroll to health insurance - hired a Big Four auditing firm to conduct a review of the firm's licensing procedures.
"We must admit that the problem goes much deeper than just process", he wrote.
Recently, though, reports had begun to surface that the company was employing people to sell health insurance, even though they were not properly licensed to do so, resulting in many of its sales being essentially invalid. In an interview in 2014, Conrad was frank about his fear of reprising that failure at Zenefits, which he described as the plausible danger in a company growing so quickly. Now, we have moved into a new phase of delivering at scale and needing to win the trust of customers, regulators, and other stakeholders.
On Friday, in a followup report, BuzzFeed reported that 83 percent of Zenefits' insurance deals in Washington state through August 2015 were done by employees without necessary licenses.
For Zenefits he said, that means "hyper-focusing on the small business market where we have product-market fit". Not because agencies can't compete against this business model, she says, but because agencies have spent so many years focused on technology advancements in the industry, they may be struggling to cultivate other aspects, including relationships with employers, communications, and messaging.