Small groups decide which firms receive Innosuisse funds.
Keystone / Christian Beutler
Several decision makers at the Swiss Innovation Agency (Innosuisse) have benefited, directly or indirectly, from public funding earmarked for supporting start-ups.
According to an investigation by Swiss public broadcaster RTS, this concerns at least 20 projects totalling more than CHF13 million ($16.2 million).
M* is a member of the Innovation Council at Innosuisse, the body that selects companies to receive subsidies. In addition, M* also manages several companies that received around CHF1 million from the same agency in 2021.
One of these companies was even selected for one of the federal agency’s flagship programmes in 2024, with a potential grant of up to CHF2.5 million.
This situation is far from unique within this public institution, which has an annual budget of roughly CHF300 million. According to RTS analysis of the federal Aramis database, around 20 subsidies have benefited companies linked to individuals serving on Innosuisse’s governing bodies.
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The agency confirmed that such a situation is possible. However, it explained that members of its Innovation Council are chosen because they have a recognised innovation track record, with expertise of business realities on the ground.
Innosuisse also clarified that some of the funding is not paid directly to companies but to research partners, such as university researchers working for the benefit of these firms.
Concentration of power
The agency pointed out strict rules for managing conflicts of interest. When a project directly concerns a company connected to a council member, that person must declare the connection and recuse themselves. They do not participate in the evaluation or the decision-making process.
These safeguards do indeed exist. Other mechanisms, however, raise doubts. A review of about ten documents obtained under the transparency law reveals that the power to allocate aid is often concentrated in the hands of only three to five people.
These small decision-making circles have given rise to some concerning situations.
In one of these small groups, X*, a member of the Innovation Council, participated three times in funding allocation sessions concerning projects of another member, Y*, who recused themself. Then, the roles are reversed: Y participated three times in funding allocation sessions concerning member X, who recused themself.
The grants were awarded on each occasion. Moreover, for two grant applications, member X is responsible for member Y’s file. Then, later, member Y is responsible for X’s file.
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“The procedures for declaring links of interest, prior verification and recusal also apply in these situations and it is not an individual decision of X or Y. The decisions are taken by the whole subgroup of at least three people,” stated Innosuisse.
“Letting a small group of three to five people decide is the worst possible situation,” said Yves Gingras, a sociology professor at the University of Quebec in Montreal and a specialist in research evaluation and peer review.
If, in addition, members of these small groups apply for grants for their own businesses, then “we’re in the worst-case scenario in terms of the appearance of a conflict of interest. All the organisations I know will tend to avoid that”.
Innosuisse recently announced a partnership with Swiss defence procurement agency Armasuisse. With a joint budget of CHF20 million, two companies aim to support three technologies with both military and civilian applications. These are navigation systems, photonics and anti-drone solutions.
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According to Innosuisse, these types of technologies were proposed by Armasuisse, but the decision to adopt them was made unanimously by Innosuisse’s board of directors.
However, two members of the Innosuisse board of directors have interests in two of these technologies. The first sits on the advisory committee of an association that defends the interests of the photonics industry, one of the three areas of interest to Armasuisse.
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The second is none other than the chairman of the board himself. André Kudelski also heads the Kudelski group, which sells security components to navigation chip manufacturers, including the Swiss-based company U-blox.
When questioned on this point, the federal agency explained that no precautions were taken because, according to them, there were no conflicts of interest.
This situation is not unprecedented. In addition to his role at Innosuisse, André Kudelski also chairs the board of directors of Montreux Media Ventures, which received CHF440,000 in aid from the federal agency.
For Innosuisse, this is not a conflict of interest either, because it is the Innovation Council that grants aid to companies and not the board of directors.
But according to corporate governance expert Dominique Freymond, “if the CHF440,000 directly benefits the company chaired by André Kudelski, then there is indeed a conflict of interest, even if the decision was made by the Innovation Council.”
“The Innovation Council should have discussed it with André Kudelski. Then André Kudelski should have brought it up with the board of directors, which should have decided on the matter without the chair present,” he added.
Who controls the funding agency?
Yves Gingras also criticises the fact that the board of directors itself appoints the members of the Innovation Council. According to him, this appointment should be entrusted to state officials because, in this case, it “doubles the perceptions of conflict of interest”.
Innosuisse is under the supervision of the economics ministry. This ministry appoints the agency’s board of directors and sets its strategic objectives. Beyond that, the economics ministry says it has no responsibility, asserting that its role is not to control the agency.
The economics ministry passed the buck to a federal agency tasked with developing a risk management system, which is implemented by the Federal Audit Office (FAO). However, the FAO disputes this, claiming it only verifies the system’s implementation.
This begs the question of who really controls this federal agency with an annual budget of over CHF300 million?
*The identities of M, X, and Y are known to RTS
Translated from German, sub-edited by Matthew Allen/ts
