
Parker Conrad Steps Down as Zenefits CEO - philip1209
http://www.buzzfeed.com/williamalden/zenefits-ceo-parker-conrad-steps-down-after-compliance-failu#.isdWP3KWDR
======
speby
This is one of the worst management announcements I have ever read. While on
the one hand, I can appreciate the forward-looking nature of making the
company better in the future and an acknowledgement of some of its
shortcomings (which every company has).

But the worst crime of all is announcing Conrad's resignation and providing
zero credit, thanks, or goodwill towards him for being the birther of the
company which wouldn't exist in the first place if not for him. Even if he had
recently run into trouble setting the company straight or other problems, it's
outright shameful to simply skip right over his contribution to making the
company what it is and for being responsible for making it happen from day 1.

This crime wouldn't be so awful if it had come from someone who wasn't already
a previous entrepreneur himself.

This is pretty sad... Parker probably would have gotten a nicer goodbye
announcement had he died.

~~~
tomasien
You are massively underestimating the magnitude of this screw up. You seem to
be implying that this was a mistake and changes had to be made, but it's time
to move on. Non-compliance can put everyone under you at risk of going to
jail. "Compliance" is short for "compliance with the law" and "non-compliance"
is short for "breaking the law".

I'm not exaggerating here, Sacks is making a deliberate decision not to
mention Conrad and act as if he's taking this as seriously as possible. It
seems that nobody was hurt by this non-compliance so I hope deeply that nobody
goes to jail for this - but that is what is on the line, make no mistake.

~~~
tedmiston
From the earlier post about unlicensed deals in Washington state:

> Washington law is particularly severe when it comes to the unlicensed sale
> of insurance. Under the law, anyone who knowingly sells, solicits, or
> negotiates insurance without the proper state license can be punished with a
> prison sentence of up to 10 years, as well as a civil penalty of up to
> $25,000 for each violation.

[http://www.buzzfeed.com/williamalden/80-of-zenefits-deals-
in...](http://www.buzzfeed.com/williamalden/80-of-zenefits-deals-in-
washington-state-done-by-unlicensed#.qwk7J5MMz)

~~~
arethuza
Out of interest, do Credit Default Swaps fall into that category of
"insurance"?

~~~
leroy_masochist
No

------
sergiotapia
I read somewhere that if the new guy writes the memo, it means the old one was
fired. If the old guy writes a goodbye, it means he's actually stepping down.

It seems Parker was fired, and not 'stepping down'.

~~~
gkoberger
Even if he resigned, he resigned under duress. This wasn't an "I'm spending
time with my family and kids" resignation/firing; it was a "oh shit we're
screwed, we need to mitigate the damage and throw Parker under the bus to save
the company". It's very likely he was a big part of the resignation
discussions.

~~~
pc86
Doesn't "throw[ing someone] under the bus" imply they're not completely at
fault? This was not an honest mistake or some above-board disruption of an
existing industry.

This was someone willfully, knowingly committing many (hundreds? thousands?)
of felonies in the interest of making money and growing the company.

~~~
dragonwriter
It can also mean (and, IME, usually means) that the person recieving the blame
was at fault but that the people doing the blaming are also substantially at
fault for the same offense, and are deflecting the blame to a particular
target as a scapegoat.

------
PhilWright
I love the way Conrad gets all the blame and is thrown under the bus...

'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.'

Not much subtlety there. Presumably as COO he had nothing to do with 'internal
processes, controls, and actions around compliance' which seems a little odd
to me. So what was he doing all day then?

I also like how the company values are instantly changed...

'Effective immediately, this company’s values are: ...'

Which is interesting because most companies spend ages coming up with the
correct values for the company and it usually involves feedback from
employees.

~~~
justin_vanw
Does anybody think that writing down company values has any effect on anything
ever? This is what people do to go through the motions of leadership when they
have no clue what their employees actually do.

~~~
aaronbrethorst
If the employees see the execs not just paying lip service, but living those
values every day, then yes, absolutely.

~~~
CaptSpify
Maybe I'm unlucky, but I've never seen a company where this is true, if they
are > 5 people. And those were non-profits where growth wasn't really a
concern.

~~~
nostrademons
TBH, I knew a number of folks within Google Search who took "Don't be evil"
very seriously. I dunno about the top-level execs, but there were plenty of
folks with mid-level VP or Director titles who cared deeply about the user
experience and doing right by users.

------
minimaxir
Context on some of the compliance failures:
[http://www.buzzfeed.com/williamalden/80-of-zenefits-deals-
in...](http://www.buzzfeed.com/williamalden/80-of-zenefits-deals-in-
washington-state-done-by-unlicensed)

~~~
x0x0
oh wow. Hopefully zenefits stands behind their employees, because this looks
scary:

    
    
       In Washington state [...] 83% of the insurance policies sold or serviced by 
       the company through August 2015 were peddled by employees without necessary 
       state licenses [...]
       
       [...]
          
       Washington law is particularly severe when it comes to the unlicensed sale 
       of insurance. Under the law, anyone who knowingly sells, solicits, or 
       negotiates insurance without the proper state license can be punished with a 
       prison sentence of up to 10 years, as well as a civil penalty of up to 
       $25,000 for each violation.
    

[http://www.buzzfeed.com/williamalden/80-of-zenefits-deals-
in...](http://www.buzzfeed.com/williamalden/80-of-zenefits-deals-in-
washington-state-done-by-unlicensed)

~~~
mikemac
A large part of the insurance industry does not like the Zenefits business
model (free software to be your broker), so I'd bet regulators are presumably
getting a lot of pressure from the insurance lobby to do something quick.

~~~
phonon
Except when "being your broker" means "some random sales dude with no training
nor experience is handling your company's health insurance."

It's not particularly hard to get licensed (usually around $100, a training
course of 40-100 hours (which they are large enough, they could set up
inhouse), and possibly fingerprinting). Is it a hassle to get licenses in
multiple states? Yeah--though most states honor other state's licenses, and
just require the fee then.

In any case, this is table stakes--and if they can't get this basic aspect
right (after being warned for years!) how well do you think they manage the
tricky stuff? And why aren't they hiring experienced health brokers in the
first place?

(The stuff about illegal rebates because they give away their software is
garbage though. I'm 100% on their side for that.)

~~~
debaserab2
I don't disagree that it's super easy to get a license and should be done
regardless – but, geez, why is that a requirement? What's so special about
selling health insurance that you should go to jail for up to 10 years if
you're not licensed in it?

I'm curious because there must be something obvious I'm missing.

~~~
jeffwass
Because this is people's health you're talking about.

Do you feel drivers should have to get a drivers licenses? I hope you don't
think Uber should just hire people off the street and put them in cars without
proper licenses.

A simple health example off the top of my head - you sell health insurance to
someone without understanding the product because you're so keen to 'make the
sale'. Meanwhile you promised the buyer it would cover that heart condition he
has when in fact you have no idea that it doesn't. A couple years later he
needs heart surgery and finds out the plan he's been paying into doesn't cover
his condition and now he cannot work to provide for his family, nor can he get
treatment to get better.

~~~
morgante
> Because this is people's health you're talking about.

That argument is about as valuable as "think of the children."

> Do you feel drivers should have to get a drivers licenses?

That's not the right analogy. The equivalent would be requiring special
licenses for all car dealership employees, which is not required. Salespeople
aren't themselves doing anything medical and there's no reason they should
have additional requirements beyond normal salespeople. We already have laws
covering both (a) fraud, (b) minimum requirements of healthcare plans.

> A simple health example off the top of my head

Existing consumer protection laws would cover this. You can't sell a product
and claim it has a feature which it doesn't — that's fraud.

Nothing about health insurance should mean that salespeople should require
licensing. It's pure rent-seeking. There are plenty of other dangerous things
which are sold by salespeople without licenses.

~~~
jeffwass
Perhaps a specific Zenefits example of employee incompetence is of use here.

The lady in this example is clearly not competent, and should not be selling
products that people depend on for their health.

Not sure why you feel having gone through the hoops to demonstrate competence,
learn about the various products, and how to advise clients of their options
is merely 'rent seeking'.

\---

"I made like $15,000 in the time I was there, just on commissions. And I never
got my license," said an insurance salesperson who left Zenefits this summer.
She estimated she had more than 100 conversations with different customers
about insurance. "I took my test three times in a row, and I failed. They
still let me work."

Without her license, she had to improvise on calls with customers.

When faced with a tricky question, "I would just google it,” she said. She
would tell the customer, "Hold on one second, let me email the expert, he's on
the line, hold on one second, I'll get back to you.” But in reality, “I would
pick one of the first three links and I would just go off of that."

[http://www.buzzfeed.com/williamalden/zenefits-under-
scrutiny...](http://www.buzzfeed.com/williamalden/zenefits-under-scrutiny-for-
flouting-insurance-laws#.bhVQBA63G)

~~~
morgante
I'm not disputing that she's incompetent.

I deal with incompetence on a daily basis. Everyone from banks to airlines
have incompetent employees, and we're not demanding that all customer support
agents undergo licensing requirements. We live in a free market and the best
way to deal with incompetence is the market. (Ex. I switched my bank after
getting frustrated with incompetent tellers.)

Once again: the worst that an insurance salesperson can do is sell you bad
insurance. They're not actually involved in medical procedures, so any harm
they can do is financial. And if that harm is due to fraud (misrepresenting a
product to you), you have legal remedies. Bank customer support people have
just as much potential to cause financial harm, but we don't require them to
be licensed.

Even more to the point: I can personally sign up for insurance directly on the
internet, without talking to any licensed salesperson. If licenses salespeople
are so essential to insurance, why can I buy insurance without interacting
with one?

As far as I'm concerned, the only professions which should require government
licensing are those where tort is insufficient to correct wrongs. (ie. someone
can die: doctors, civil engineers, etc.)

~~~
forgetsusername
> _Once again: the worst that an insurance salesperson can do is sell you bad
> insurance. They 're not actually involved in medical procedures, so any harm
> they can do is financial._

That's it, huh? Just financial? Only, you might get stuck holding the bag for
a bunch of medical bills that aren't covered by some insurance policy you
bought, so you get to spend your sick days fighting a legal battle against a
company you might never be able to recover a cent from.

> _" Bank customer support people have just as much"_

Completely ignorant.

~~~
morgante
> you might get stuck holding the bag for a bunch of medical bills

What part of that is not financial?

> Completely ignorant.

Is there a licensing requirement for bank CS representatives that I'm somehow
not aware of?

Ad hominem attacks are not an acceptable form of argument on HN.

~~~
run4yourlives2
As someone in the industry but not in the US, I'd say this is a case where
your ignorance (and you are clearly ignorant here) is more of a hindrance than
a benefit.

Providing insurance advice is the same as financial planning, mortgages,
investments and any of a number of professions that are all licenced by the
state. The reason for these licences is because not having them creates a
wealth of misinformation that can (and historically has) resulted in massive
amount of fraud and theft from consumers, because - like you - they generally
aren't knowledgeable enough to be able to discern a difference of professional
opinion from someone selling snake oil.

A licence is a minimum requirement to show to everyone that you have grasped
the basic concepts and rules surrounding the product you are _advising others_
on. It does some other things as well, like ensure you have proper E&O
insurance and stay up to date with changing legislation, but that isn't its
primary purpose.

Licencing is a form of consumer protection. End of story. Arguing that it
isn't necessary and/or consumers in these industries don't need protection to
counter their ignorance (which is the entire reason they are buying advice in
the first place) is naive almost to the point of being moronic.

------
JonFish85
Excellent. I hope this is the first of several CEOs to lose their jobs over a
lackadaisical approach to following the law. I cannot stand the attitude that
several of the most "successful" startups follow that laws are just barriers
to profit, and I think more CEOs (and investors) should be held accountable
for blatantly ignoring these laws on their way to many billions of dollars.

Uber, Airbnb and Theranos come to mind first. As much as I want to see the
daily fantasy sports put out of business, they at least had the foresight to
punch a legal hole in the system to try to create a business (and not to
mention they seem to be in the death throes anyhow).

It bothers me that investors seem to be so nonchalant about investing in a
business that is in very questionable legal circumstances. I don't really know
how to solve it, but it feels like investors do their due diligence (I hope!),
but figure that the legal system is slow so there's a good chance that they
can exit before any legal ramifications kick in.

~~~
JoeAltmaier
I dunno - I think of it as testing the law. If they didn't try, nothing would
change.

And selling insurance without a license? If it was just flouting protectionist
laws I'm all in favor. So many regulations are about keeping some lobby
profitable, and not protecting the public.

~~~
JonFish85
Is the place to test the law in the marketplace, or in court? It's fairly easy
for startups to argue the case that "the government is keeping you down",
especially when their very existence depends on that argument. But there is
also generally a flip-side to the argument as well. In Airbnb's case, zoning
laws, insurance requirements and such are all in place not to protect the
interests of Marriott (at least not entirely); they exist because populations
as a whole want them to exist.

------
neptunespear
This was the guy that publicly rescinded a job offer on Quora, right? What a
colossal dick he sounds like.

~~~
hga
Indeed it was: [https://www.quora.com/What-is-the-best-way-to-start-my-
caree...](https://www.quora.com/What-is-the-best-way-to-start-my-career-Uber-
or-Zenefits?share=1)

A pretty big clue, of the "writing in the sky with fire" variety.

------
goeric
This must be a really rough thing to go through, but I am sure Parker is doing
what is best for the company at this time (whether it was forced on him or
voluntary). Zenefits is the greatest thing to happen to SMB's in years, and I
am excited to see it continue to grow.

Maybe Parker will make a triumphant Jack Dorsey-like return when the time is
right. Or maybe he'll disrupt another multi-billion dollar industry. Whatever
it is, smart people will follow him.

* disclaimer: I am a very happy Zenefits customer

~~~
chetanahuja
_" Zenefits is the greatest thing to happen to SMB's in years"_

Not sure about that. We tried working with Zenefits for our benefits and their
agents screwed up so many times while trying to onboard our small team that we
got alarmed and went with another provider (who ended up being a lot cheaper
too).

~~~
Riod
Curious, who would that provider be? We are a smallish company too

~~~
chetanahuja
Trinet.

~~~
outericky
It is my understanding that in order to get those lower price Trinet becomes
the employer to your employees, therefore they can get a huge discount on
group rates. However, your employees technically now work for Trinet, not your
company. While perhaps ok at a small scale, as you grow, that's not exactly a
great position to be in.

~~~
zifnab06
I have something useful!

Previous company had the following in their contract:

    
    
        TriNet Group, Inc. (“TriNet”): The Company’s payroll and other human resource management services are provided through TriNet, a
        professional employer organization. This arrangement between the Company and TriNet means that TriNet will be considered your
        employer of record for payroll and human resource management purposes and your managers here at the Company will be responsible for
        directing your work, reviewing your performance, setting your schedule, and otherwise directing your work at the Company. This means
        that the Company and TriNet are co-employers, and you are technically a “co-employee”. As a “co-employee” of TriNet, you will be
        required to accept the policies and procedures set forth in TriNet’s Terms and Conditions Agreement (“TCA”). 
    

More or less: income came from TriNet, insurance/benifits all came from
TriNet, but I technically worked for $company.

~~~
outericky
However they spin it, technically you worked for TriNet. TriNet probably has
some professional services agreement with your company that pays what it costs
to employ you (salary, taxes, benefits), but your W2 says TriNet.

~~~
morgante
I don't see what the actual problem is with that. Until you reach scale
(hundreds of employees), there's not a problem.

~~~
ogsharkman
Yeah, and at that point you probably won't be using TriNet anymore.

------
minimax
It kind of sounds like Zenefits is looking at some heavy (multi million
dollar) fines, and they're trying to drive the narrative before fines and
regulatory actions are announced.

------
cavisne
Super conspiracy theory but I wonder if Sacks saw this coming from a mile out.
From Paypal he has heaps of experience with what puts you on a regulators
radar. Maybe he saw a naive CEO who would land in trouble soon enough.

Zenefits is a weird mix of wall street sales types and ex Yammer employees,
the former might be out the door pretty soon.

~~~
mikemac
Didn't Sacks make a ton of money from the Yammer deal though? I'm surprised he
even took another job; thought he'd go the mostly full time angel/VC route. A
COO for any company is not a cakewalk.

~~~
w1ntermute
And Elon made a ton of money from PayPal, yet he founded and is running two
companies that are a lot more impressive than an enterprise SaaS provider. Not
everyone is content to sit on the sidelines after they've hit it big.

------
raz32dust
Anyone notice the top 3 posts on HN are about CXOs stepping down?
[http://imgur.com/TUKnHpU](http://imgur.com/TUKnHpU)

------
philip1209
I predict that Parker will join YC as a part-time partner. This may shed him
in a negative light, but it does not erase the things he has accomplished in
the last few years. Zenefits became a billion-dollar company that scaled its
sales efforts at a record-breaking pace. Startups can learn a lot from him
about building a sales machine.

~~~
geofft
That sounds like even more of a mistake than inviting the guy who sold Loopt
for $43M to some random prepaid credit card company after raising $39M of
investment money to be a part-time partner at YC.

~~~
jacquesm
What a crap comment. Do you also spit on the walls of the houses of your
friends when you visit?

Knowing when to sell and when to hold is a very tricky decision, plenty of
people don't know what call to make and end up riding their companies all the
way into the abyss. If you've done considerably better then maybe it's time
you told the story, if you didn't admit you're jealous and get over it.

~~~
geofft
It's funny that pointing out that someone made 10% RoI is spitting on walls.
It's not a fantastic return, but it's certainly not a failure.

But that goes to the original problem: YC participation is advertised as a way
to make money beyond your wildest dreams, but the only people who can actually
_expect_ to do that are investors. So many good and competent founders fail
that even a modest success is enough qualification to lead YC; at the same
time, the fact that so many good and competent founders fail is so taboo that
pointing out that YC's president was _only_ modestly successful looks like an
insult.

And, to bring this back on topic, it is more-or-less this taboo that compels
companies like Zenefits to prioritize stupendous growth over complying with
the law. They could have grown cautiously and still made well over a 10% RoI,
but they wanted to gamble harder.

~~~
nostrademons
I know plenty of YC founders (and even an early employee or two) that have
ended up financially independent because of it.

Investing in, founding, and leading a company are three different skillsets.
The best founding CEOs usually are not venture capitalists; you don't see
Larry Page, Elon Musk, or Steve Jobs wishing they were investors. Similarly,
it's possible to be a good _founder_ and terrible _leader_ (eg. Parker Conrad,
Pierre Omidyar), or a good _leader_ but incapable of founding something (Eric
Schmidt, Sheryl Sandberg) or a mediocre founder but excellent investor (Sam
Altman, Paul Graham, Eugene Kleiner, Don Valentine).

------
staunch
A classic coup d'état. This is the danger of taking VC and hiring a COO that
clearly wants to be CEO.

1\. Wait for a misstep by the current leader.

2\. Play it up as a huge problem that could threaten the company.

3\. Suggest that maybe someone else could do better.

~~~
exw
> 2\. Play it up as a huge problem that could threaten the company.

It absolutely was a HUGE problem. Even if he was set up, Conrad created a
toxic culture that had to change.

Parker never seemed to understand that he could not flout laws & regulations
like Uber; Uber has leverage because consumers love their product, and is able
to put pressure on the incumbents and regulators; in contrast, NOBODY would
stand up to defend Zenefits, and regulators will shut them down unless they
clean up their act asap.

Edit: fixed typo (thanks @gingerrr)

~~~
flylib
as a counter point Zenefits already won against the state of Utah when they
tried banning them so yes people have already stood up to defend them

[http://fortune.com/2015/04/13/zenefits-utah-ban-
insurance/](http://fortune.com/2015/04/13/zenefits-utah-ban-insurance/)

~~~
alexqgb
FYI: The laws of the State of Utah and those of Washington are not
interchangeable at your convenience.

------
latchkey
"Effective immediately, this company’s values are: #1 Operate with integrity.
#2 Put the customer first. #3 Make this a great place to work for employees."

Ummm… what were the values before the switch?!?

~~~
jcsnv
#2 should be #1

~~~
konklone
er no, #1 should be #1

~~~
wlesieutre
It's a joke on saying "Put the customer first" as the second item in your
priorities. "Put the customer after integrity, but before all that other
stuff" doesn't roll off the tongue as well.

------
fblp
That is a well written email announcing the change. I liked the emphasis on
vision, culture and focus.

~~~
dkarapetyan
Which part is good? Sounds like the usual legalese. Rough times, change of
culture, some tough decisions. Usual fare.

~~~
exw
Do you work in a larger company? This is crystal clear (if you know what to
look for) vs. the usual generic communication that happens in larger companies
around these types of changes...

~~~
Riod
This was rather clumsily written. Even if your company messed up, shoving your
CEO with a boot up his ass is bad for morale. The reason why most communiques
are generic is because there's very little upside to being abrupt publicly.

~~~
exw
<<The reason why most communiques are generic is because there's very little
upside to being abrupt publicly.>>

You are quite wrong, if anything, employees appreciate openness and
decisiveness, vs. sweeping changes under the rug with generic language. There
is actually a ton of upside to creating honest communication, but it's much
harder than hiding behind empty phrases, which then builds a culture of
speculation (of what "really happened"), politics, and distrust.

I have no idea what really happened behind the scenes and why exactly the new
CEO used this language, but I can assure you that any email from David Sacks
will not be clumsy, but very deliberate and written to achieve a specific
purpose. (There is some speculation on earlier threads around of why it might
have been written this way).

~~~
Riod
Not talking about employees. You can release whatever message you want
internally. It's the external message where upside downside needs to be a
consideration. By which I mean whatever you say in email can be printed and
quoted. Disseminate the message not email

~~~
exw
I both appreciate and agree with your point, but in this case I think the
issues was that their new CEO had to assume that, given the high visibility of
the company, whatever message he was going to send out to his internal team
was also going to get leaked to the press.

If you are in that type of situation, you have to chose between your employees
and external parties, and looks like he decided that creating a trusted
relationships with his employees was more important...

~~~
Riod
Maybe that was how he was thinking about it. Hope it works out for them.
Cheers.

------
guelo
Trying to operate an Uber/AirBnB style ignoring of regulations can work when
you're dealing with hundreds of small time, underfunded municipal governments.
But when your regulators are federal and state level you have to straighten
the ship real quick if the eye of Sauron looks your way.

~~~
eldavido
True, but that's taking a very "realpolitik" attitude toward it.

What about the fact that breaking the law is (often) morally wrong in its own
right? Even if you disagree with the law, I don't want to live in a place
where laws are toothless and optionally followed; the side effects of such
lawlessness would be horrible, and huge.

This whole thing really got me thinking about how we in SV/SF think about laws
and their enforcement. It might sound a little mean, but I almost hope they
make an example out of Parker Conrad and Zenefits to nudge the pendulum of VC-
funded companies a bit back toward respect for laws and compliance, rather
than this "fuck it, they won't enforce it and if they do, we'll just have our
well-connected VC partner make an off-record call to the
governor/senator/regulator and magic it away" that seems so common today. All
in the name of GROWTH.

~~~
SeoxyS
Laws need to evolve with society. Often, that means that they are challenged
due to a edge case in a changing society.

------
feed16
_" Our culture and tone have been inappropriate for a highly regulated
company"_

That might not be a bad thing. It could be precisely because it was
inappropriate that Zenefits got ahead.

~~~
dragonwriter
> That might not be a bad thing. It could be precisely because it was
> inappropriate that Zenefits got ahead.

...for now. But if the end result is massive fines, plus a bunch of their
sales staff (and maybe their superiors) getting thrown in prison under
Washington's criminal laws relating to selling insurance without a brokers
license, plus ruining the company's relationship with customers and with the
insurers whose products it sells (and possible breach-of-contract actions from
those insurers).

Well, then, getting ahead for a little while before the whole thing caught up
to them isn't going to seem like a big advantage.

------
tedmiston
> Our culture and tone have been inappropriate for a highly regulated company.

> Effective immediately, this company’s values are...

Translation: This will no longer be an enjoyable place to work.

~~~
aaronbrethorst
Making "Move fast and break things" be an axiom of your development process is
not a prerequisite for having fun at the office.

------
halcyondaze
What's with these new values?

Effective immediately, this company’s values are:

#1 Operate with integrity.

#2 Put the customer first.

#3 Make this a great place to work for employees.

Did these not exist prior to Conrad stepping down? If they did, and this still
happened, they're clearly bad values to hold.

For one, they're unspecific and don't have a clear opposite. No one is going
to take the opposite on these, meaning they can't really be values.

No one will proudly state that

#1 Don't operate with integrity.

#2 Put ourselves first.

#3 Make Zenefits at least a mediocre place to work.

Are good values, so the values the new CEO espoused aren't really actionable
or value-able in any way.

Anyone have a different take that I might be missing?

~~~
tempestn
I agree that they're not particularly specific, but I don't think that a value
has to be controversial - ie that its opposite could also be a reasonable
value - in order to be useful. By selecting certain things as key values and
excluding others, and possibly by ordering the values by priority, you still
give some direction.

~~~
halcyondaze
Maybe not have a complete opposite that could also be valid, but at least
state some sort of preference or be able to be used to make a real decision.

He goes on to say that he wants to push decision making ability down in the
company, but if you're looking at those 3 values, it seems hard to make clear
decisions based on them.

------
CGamesPlay
What happens to founder equity in high-profile cases like this? If he's given
up his position at the company as well as on the board, did he keep much of
his equity? This has to be a difficult time for Parker.

~~~
vasilipupkin
They keep it. He is a shareholder like any other.

~~~
vasilipupkin
to the downvoters: is the deposed CEO not a common shareholder like any other
common shareholder?

------
timrpeterson
YC, you might want to slow down your own growth. Your unicorns aren't fairing
well. Gotta keep your game tight.

-says someone who doesn't know much but can spot obvious trends.

~~~
geofft
Ohhhh I would be fascinated to see a RICO case against YC for every startup
they've funded that's broken laws. That seems entirely in the spirit of RICO,
the more I think about it: it's specifically about organizations that make
money off of other people breaking the law at their direction, and who might
otherwise avoid liability because they themselves didn't break the law.

~~~
apsec112
RICO cases are limited to a small number of serious crimes, like kidnapping,
extortion, arson, drug trafficking, and so on. They don't cover breaking
insurance regulations.

[https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corru...](https://en.wikipedia.org/wiki/Racketeer_Influenced_and_Corrupt_Organizations_Act#RICO_predicate_offenses)

~~~
greenyoda
_" kidnapping, extortion, arson, drug trafficking, ..."_

Interestingly, "criminal copyright infringement" also somehow got on the list
of RICO predicate offenses. Guess someone had a good lobbyist...

~~~
nostrademons
Also, apparently holding Magic: The Gathering tournaments where ante is
allowed falls under RICO. Sponsoring underage gambling. I recall that being
used as the reason why none of the major tournaments used the ante rule - they
were all afraid of being prosecuted as racketeers.

------
philip1209
Confirmed by multiple sources:

USA Today reporter >
[https://twitter.com/jguynn/status/696847880921833473](https://twitter.com/jguynn/status/696847880921833473)

Fortune reporter >
[https://twitter.com/eringriffith/status/696847400456097792](https://twitter.com/eringriffith/status/696847400456097792)

------
___ab___
Move fast and break things (laws included).

------
newman314
The wording around values is odd. What were the previous values if one of the
new values has to do with integrity?

~~~
geofft
It says that two paragraphs earlier:

> _Zenefits’ company values were forged at a time when the emphasis was on
> discovering a new market, and the company did that brilliantly. Now we have
> moved into a new phase of delivering at scale and needing to win the trust
> of customers, regulators, and other stakeholders._

i.e., they valued growth over integrity and following the letter of the law.
That evidently works for some startups some of the time, but this seems like a
bad industry to try that approach in.

------
sillysaurus3
Why do those laws exist in this case? What's the danger that they protect
against?

~~~
minimaxir
Scams are rather common in the insurance industry. The consequences of a bad
insurance policy are why regulation is important.

------
jstalin
That internal audit must be a doozy.

------
premalshah
Poor zenpayroll had to change their name to gusto. Now it looks like a good
move. Distance yourself from the unicorn.

------
pedalpete
Looking forward to hearing Parker's side of the story one day. The one thing
you can't deny is he built an amazing business, absolutely agree that it needs
to manage the regulatory hurdles, but that wouldn't even have been an issue if
he hadn't gotten them this far.

Probably not the last we'll hear from him.

------
tomasien
Zenefits is lucky to have David Sacks for CEO.

But this is an important reminder to Fintech companies: compliance is your
life.

------
jusben1369
This is kind of like Uber firing Travis with a "we operate in a highly
regulatory space. Compliance is our oxygen and so Travis, who has constantly
flouted regulations, is gone"

------
feed17
_Our culture and tone have been inappropriate for a highly regulated company._

This might not be a bad thing. It could be precisely because it was
inappropriate that Zenefits got where it is today.

------
selvan
Growth of Zenefits is a dream for many entrepreneurs. Instead of working with
legacy compliance related issues, Parker would have chosen to deal with them
latter, to focus on the growth. Parker would have driven by excitement of
hyper growth. If he had chosen to work with compliance related stuff, not sure
they would have gotten this far, this quickly. Is the compliance issue a
mistake (or) Is it a crime?. If compliance issue is a crime, did he even aware
of that?.

~~~
___ab___
It is unquestionably a crime. One could argue that it was worth it (I doubt
it) but there's absolutely no question that what happened was criminal.

------
firloop
Conrad stepped down from the board as well. Here's hoping new leadership can
bring the company in compliance and turn the trajectory of the company around.

~~~
tedmiston
He was removed involuntarily.

> Zenefits also removed Conrad from its board of directors, while adding three
> prominent investors, according to an announcement on Monday.

------
dimva
I think the regulations for selling insurance are reasonable and necessary,
but it looks like both Zenefits and Conrad will have benefited more from
flouting them and getting caught than they would have if they followed the law
from the beginning.

It doesn't bode well for regulation and our society in general when flouting
the law has a higher return than following the law, _even if you get caught_.

~~~
pc86
I get what you're saying and I agree with you, but what's the alternative?
It's hard to justify a $5,000,000 fine or a multi-decade prison sentence for
selling someone insurance without a license.

~~~
acveilleux
The fine is pretty easy to justify and is all that can be assessed against
Zenefits the corporation. And since it's well funded, multi-million dollars
would be warranted so the fine is substantial enough.

It would be a lot more suprising to see them go after employees or look at
prison unless there were agravating factors like actually defrauding the
buyers with regards to the nature of the coverage.

------
cat-dev-null
First, Zenifits business model was novel for a double-ended marketplace... get
suppliers (insurance companies, etc.) to sustain the business.

How do Zenifits compare to Paychex (the old standby of payroll processing) and
Workly? What are folks using right now to expedite/automate employee
provisioning (& termination) around HR things?

------
eitally
Theranos should take this as a clear sign of what they need to prepare for if
they can't clearly explain the shenanigans they've been accused of, some of
which are similarly brazen flaunts of well-established agency/industry
regulation.

------
nacs
From the Zenefits homepage: "Payroll, benefits, time, _compliance_ , and more"

And the article: "Parker Conrad has resigned as CEO of Zenefits, following a
number of regulatory _compliance_ failures"

The irony..

------
namelezz
What's wrong with 2016? Too many resigns.

------
flylib
no surprise they jumped on the first chance they could to get rid of Conrad

------
dang
We changed the url from
[https://twitter.com/williamalden/status/696847841294024704](https://twitter.com/williamalden/status/696847841294024704)
to this one, which gives more info. We can change it again if anyone suggests
a more substantive URL.

~~~
mayank
Honestly, the Buzzfeed story has more information in it than the Venturebeat
article linked, which basically just has the announcement text:

[http://www.buzzfeed.com/williamalden/80-of-zenefits-deals-
in...](http://www.buzzfeed.com/williamalden/80-of-zenefits-deals-in-
washington-state-done-by-unlicensed#.fw6y2R1Z)

~~~
dang
It has more information on the leadup for sure, but given the current
announcement, the text of Sacks' email seems even more relevant. I wouldn't
normally say that about a corporate communication but it is an unusual one.

Eventually we'll have some system to aggregate related urls that isn't so all-
or-nothing.

~~~
danso
They just posted their own story, with a copy of the email:
[http://www.buzzfeed.com/williamalden/zenefits-ceo-parker-
con...](http://www.buzzfeed.com/williamalden/zenefits-ceo-parker-conrad-steps-
down-after-compliance-failu)

~~~
dang
Ok, we've changed the URL to that from
[http://venturebeat.com/2016/02/08/zenefits-ceo-parker-
conrad...](http://venturebeat.com/2016/02/08/zenefits-ceo-parker-conrad-
resigns-coo-david-sacks-takes-over/). Thanks!

------
morgante
Kindly review the HN guidelines:
[https://news.ycombinator.com/newsguidelines.html](https://news.ycombinator.com/newsguidelines.html)

If you would like to engage in a polite debate over the extent to which it's
appropriate for governments to regulate the economy for consumer protection,
I'm happy to do so.

I will not, however, engage with ad hominem insults.

~~~
run4yourlives2
There's nothing ad hominem in pointing out that your argument is based on
ignorance because you lack specific knowledge of this area of expertise.
Sorry, but pretending you are on some equal footing with people much more
experience in a particular industry is the only logical fallacy here - False
Balance.

If I argued - as a non-doctor - that anyone should be able provide medical
advice to people without being an MD, or that Joe Shmo should be able to
provide legal advice without being admitted to the Bar, you'd rightly call
that attitude ignorant and naive. The same holds true with your argument. It
simply comes from a place too far removed from the topic at hand to be
considered even remotely viable.

Don't take it as an attack on you, it isn't. Do take it to mean that you are
clearly out of your element, and that with a little bit of research on your
part, you'll understand why this is so.

~~~
dang
What you posted was against the HN guidelines not because it was an ad hominem
but because it called names ("you are clearly ignorant", "naive almost to the
point of being moronic"). It's particularly uncivil to say things like that
and then add "don't take it as an attack on you", as if you hadn't added to
the problem.

You clearly have experience and knowledge. There was no need to make this
personal. If someone is ignorant, show them that by responding factually and
stop there. Don't rub their face in it.

~~~
run4yourlives2
1\. You are ignorant on this topic. This doesn't mean the same thing as "You
are stupid", it means precisely: "You lack key knowledge about this particular
topic." That's how I used it.

2\. I provided a few paragraphs telling why these conditions exist, and why
arguing against them is not something someone educated in the topic would
consider even attempting.

3\. When you continue - over the course of several comments - to progress with
your argument from a position of clear ignorance, it does indeed require
increased naivety to the point of absurdity.

If you are going to take a stance on a subject you know little about, and then
continue to assert that opinion, you can't get upset when people use more and
more direct means to communicate with you. Don't assert a position that is
based from a position of ignorance; seek to learn instead.

Also: I'd just like to point out the ironic nature of asserting meaningless
comments are against 'guidelines' while at the same time suggesting guidelines
are irrelevant for a much more important human concern.

~~~
dang
"You lack key knowledge" is already an order of magnitude less name-calley
than "You are ignorant", because it doesn't take the form "You are X". But why
diminish the other person at all? Build them up by increasing their knowledge.

The distinction here is simple. Factual comments about insurance and
licensing: great for HN. Comments about people's knowledge levels and getting
tangled in personal bickering: bad for HN.

------
us0r
"The Zenefits spreadsheet covers 132 unique insurance policies sold or
serviced from November 2013 through August 2015."

Is that really all they sold? Utah had pretty dismissal numbers as well. How
did they get to multiple billion valuation?

~~~
FireBeyond
I assumed that meant "products", as in 132 unique insurance products, rather
than 132 belly buttons insured (phraseology in the health insurance industry).

~~~
phonon
No, they probably mean group health plans (companies covered) sold. Probably
average a dozen lives per policy maybe.

They "signed up" 10,000 companies as of a year ago[1]...but I'm not sure how
many of those they sold health insurance to!

[1] [http://www.siliconbeat.com/2015/01/15/zenefits-releases-
grow...](http://www.siliconbeat.com/2015/01/15/zenefits-releases-growth-
numbers-headed-for-100m-in-revenue/)

------
lquist
Good riddance. Zenefits is the most bug-ridden piece of software I've ever
used. It's completely unusable at times.

------
andrewfromx
I see this as a case of a brilliant entrepreneur (Parker) tackling the world
of health care and winning. I don't view these horrible crimes he's accused of
as anything other than tatics from the status-quo and his competition. It
wasn't possible to get from point A to point N (where Parker took the company)
without breaking these "rules" but he didn't actually break any rules because
this is all new territory. Any new business "distrupting" an existing one will
anger the people losing money. And they will use their lawyers and try and
fight for every last dollar by claiming this "distruption" isn't legal for
reason x,y,or z. David is now taking the company from point N to point Z
because Parker is tainted. That's fine. I think this was always the plan. And
as a shareholder I think Parker is very happy David is now CEO moving to step
Z.

~~~
dininglogistics
Winning? The company is a giant mess, and the shit has not even hit the fan
yet, this is just the start.

Parker didn't accomplish anything positive as CEO of Zenefits, ever. There's a
ton of companies using Zenefits services who aren't happy. They haven't left
because switching is a major pain in the ass. You think it's by accident that
Parker chose to disrupt three of the industries with the highest customer
retention rates. This board knows damn well that it's not because the
(industry) solutions are awesome, it is because switching is painful and
costly. Zenefits overall customer satisfaction sucks, as does feedback from
employees and overall morale, check GlassDoor.

Parker found a way to piss off not just one highly regulated industry (health
insurance) but three. He told a "journalist" from BI that the CEO of ADP
"threatened him like Dirty Harry" in true SF/SV tabloid fashion. You think
Warren Buffet ever did something like that?

From day one, on stage at TC Disrupt, he acted like a cocky spoiled brat,
which is precisely what he is.

He managed to create enemies with many of the companies Zenefits originally
did business with, and then relished in it when it made headlines, ala
"project nutshot".

Zenefits is a company that is not only on track to lose hundreds of millions
of its investors money, but it literally put its employees freedom at stake.
People could be facing jail time because of how blatantly Zenefits ignored the
law. More than 80% of sales in WA were by unlicensed reps. Tip of the iceberg.

Had Zenefits reached a $60M run rate without breaking the law, without
requiring over $500M in VC, without requiring a near $100M burn rate, without
Parker being abusive and unprofessional, well I'd have no choice but to
congratulate Parker on his accomplishments.

All this guy did was burn through a ton of money, make a fool out of his
investors and mismanage this company to the point where the massive
fundraising at a $4.5B valuation, and all but inevitable write down, have sent
every employees shares into a watery grave.

Learn from this. Don't try to romanticize the Zenefits story. If you look
beyond the PR machine, you'll find a company that has done almost everything
wrong under the helm of someone who was more interested in accomplishing
something for himself, "proving people wrong", because of the self-described
chip on his shoulder.

Just be glad you're not David Sacks, because unwinding this mess is going to
be nearly impossible, and investors are going to be brutal. I wouldn't want to
have to answer to Jordan Catalano.

~~~
andrewfromx
And Travis at Uber? Also "proving people wrong", because of a chip on his
shoulder? Did Uber flaunt the law? Or did they end up changing the laws
because people like Uber so much? I'm pretty sure this is how every big
disruption goes. It's messy. People get super pissed. And it comes down to
political views on were the regluations even needed in the first place.

~~~
dininglogistics
By messy, do you mean like creating a working environment that encourages
people to commit felonies in order to accelerate sales? Because usually
employees get screwed out of stock in hyper-growth start-ups that raise
hundreds of millions at unsustainable valuations, not go to jail. No one
typically has to worry about breaking the law in order to meet absurd sales
goals. You think maybe just maybe Parker kind of painted the company into a
corner by telling investors like Fidelity and TPG that Zenefits could become a
$100 Billion market cap company and that they're leaving money on the table.
Zenefits fall from grace will become the cautionary tale from this technology
boom. Disrupt an industry all you want, just don't put your employees freedom,
or your own, at risk.

Also, invoking TK is pointless and shows that you can't distinguish apples
from oranges.

