BAE Systems, Europe’s largest defence company, is leaning towards an external candidate for chief executive as it attempts to break from past allegations of bribery and corruption.

The shortlist is understood to include only one BAE employee, Ian King, the chief operating officer. There are thought to be a couple of Americans being considered and three others from the UK and Europe. It is possible that the successful candidate will be unveiled at the annual meeting on May 7. The names of external candidates include Chris Kubasik, executive vice-president of America’s Lockheed Martin, and Andrew Inglis, chief executive of BP’s exploration and production division. Mr Inglis has the benefit of being a BAE nonexecutive.

Dick Olver, the chairman, is attempting to change BAE’s culture after a series of allegations about its past arms deals. The company is under investigation by the Serious Fraud Office (SFO) over four international deals and is also the subject of an inquiry by the US Justice Department.

The High Court ruled yesterday that the SFO unlawfully ended another investigation into BAE’s dealings with Saudi Arabia, raising the possibility that this case may be reopened.

Such a move would seriously damage diplomatic relations with Saudi Arabia and threaten BAE’s £20 billion deal to supply 72 Typhoons.

BAE has been accused of operating a £60 million slush fund to entertain Saudi royals. The company denies any wrongdoing but Mr Olver has worked hard to change BAE’s approach to ethics.

Walt Havenstein, the head of BAE in North America, and Alan Garwood, the marketing director, are not thought to be on the shortlist. BAE declined to comment on candidates but said it expected to make an announcement before August.

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