BAE Systems has been told to publish a global code of ethical business and strengthen its anti-bribery measures in a review into its business practices.
The study by former Lord Chief Justice of England and Wales Lord Woolf was launched after accusations that BAE made multi-million-pound payments to help win a deal from Saudi Arabia – though all parties deny any wrong-doing.
It sets out 23 recommendations for the firm, including commissioning an external audit of its ethical business conduct and management of reputational risk within three years.
Lord Woolf says BAE needs to deliver higher ethical standards through greater openness and transparency.
“Despite the progress made, the company has a substantial task ahead if it is to meet higher standards,” he says.
“If reputational issues are not promptly addressed they are likely to fester.”
The report did not look at Saudi contracts into which the Serious Fraud Office (SFO) conducted a bribery and corruption investigation.
This investigation was dropped on the grounds of national security following pressure from the government.
The High Court ruled last month that the SFO acted unlawfully in its decision to drop the investigation.
The SFO is set to take the matter before the House of Lords.
Although no wrong-doing has been proved, the report says BAE’s reputation continues to be tarnished by allegations of past unethical conduct.
“Critically, both the chairman and chief executive, in discussions with us, acknowledged that the company did not in the past pay sufficient attention to ethical standards and avoid activities that had the potential to give rise to reputational damage.
“Combined with this was its acceptance of conditions which constrained its ability to explain the full circumstances of its activities.
“Together, these contributed to the widely-held perceptions that it was involved in inappropriate behaviour.
“They recognise that, justly or otherwise, these perceptions have damaged the company’s reputation and that it must continue along the route of taking all practicable steps to ensure that such circumstances do not re-occur in relation to future contracts.”
BAE has yet to comment on the report.
By Elizabeth Clifford-Marsh