Zenefits, a fast-growing San Francisco start-up that has attempted to shake up the health insurance brokerage industry, said on Monday that Parker Conrad, its co-founder and chief executive, had resigned from the company and from its board of directors.
Mr. Conrad was replaced by David Sacks, who joined Zenefits a year ago as its chief operating officer. Mr. Sacks previously had led his own start-up, Yammer, which was acquired by Microsoft in 2012.
Mr. Conrad’s recent tenure was rocked by lapses in complying with health insurance regulations in several of Zenefits’ markets. The company makes software that is intended to streamline the way small businesses buy health insurance for their employees. The company was valued at $4 billion in a funding round last year, and its investors have called Zenefits one of the fastest-growing business software companies in history.
But in the last few months, a series of reports by BuzzFeed News found that the company was cutting corners in its rise. According to BuzzFeed, Zenefits employed unlicensed brokers to sell insurance to customers, resulting in scrutiny from regulators and the undoing of many of its sales. In an email to employees on Monday, Mr. Sacks pointed to these failures as the reason for Mr. Conrad’s departure.
“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,” Mr. Sacks wrote. “As a result, Parker has resigned.”
Mr. Sacks vowed to reform the company’s processes for dealing with regulators. He appointed Josh Stein, a former federal prosecutor, to become the firm’s chief compliance officer. Mr. Stein will be…