BAE told get ethical or risk damage

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BAE, which has faced long-running controversy relating to allegations about its conduct on a Saudi arms deal, will also need to adopt stronger anti-bribery measures and a global ethical code of conduct.

The proposals were among 23 recommendations made by an independent committee headed by Lord Woolf, the former Lord Chief Justice, following a year-long review into current policies and practices at BAE.

Lord Woolf said BAE risked suffering "long-term damage" if it pursued every defence contract regardless of ethical considerations.

He said: "BAE either becomes an ethical company, which involves refusing to get involved in some contracts, or it does not become a fully ethical company reaching the gold standard that we have identified.

"There are contracts that are not worth having and that will do long-term damage to the company, and the company has to accept that."

The committee said regular, independent external audits of business conduct were also needed to help restore confidence in the firm. It can strengthen anti-bribery measures by the way it appoints, manages and pays advisers.

While the Woolf Report did not investigate previous allegations, the report contained an admission from BAE's chief executive and chairman that the company paid insufficient attention to ethical standards in the past.

Lord Woolf said BAE had already made considerable progress in improving standards, but added that it now had a route map to ensure it became a "leader among global companies" for standards in business conduct.

The company will outline how it plans to respond to the Woolf report by the end of July. It has previously pledged to implement the findings.