Lord Woolf, who published the findings of his long-awaited report into the company on Tuesday, said he had reviewed the internal workings of the company and drawn up a "road map" to reach the highest standards.

He said he had not looked into a deal between the firm and Saudi Arabia from the 1980s, which was at the centre of a £43 billion fraud investigation controversially dropped last year, but said that a deal signed with the Middle East kingdom last year was ethically sound.

BAE employs more than 10,000 people at its bases in Warton and Samlesbury, near Preston.

In an interview with Radio Four's Today programme, Lord Woolf said: "The company, like most companies in the past, had just focused on the law, there were no ethical standards in the company.

"We have gone a considerable way to getting those standards, but what we have said is that it has still not gone far enough on that.

"We have given it a road map to reach the gold standard."

The report said that BAE's chairman Dick Olver and chief executive Mike Turner had both admitted to failing to "pay sufficient attention" to ethical standards and avoid activities that had the potential to damage its reputation.

The company commissioned the review last year following damaging allegations made against it in the wake of the Serious Fraud Office's decision to drop its probe into the Al-Yamamah defence deals between BAE and Saudi in December 2006.

Lord Woolf refused to be drawn into talking about that contract, which saw Tornado and Hawk fighter jets and other military equipment sold to Saudi in the 1980s, but said that a deal signed last year to sell 72 Lancashire-built Eurofighter Typhoon jets to the Middle East kingdom was sound.

He said: "The Al-Yamamah contract is 20 years old and I have no doubt there are aspects of that contracts that would be different if they were today.

"I did have information on the new contracts to be satisfied it did not give rise to unacceptable risks, to ensure it did not create a risk of similar allegations as the old contract."

The 140-page report recommended BAE publish and implement a global code of ethical business conduct, as well as carry out a regular, independent and external audit of business conduct.

In a statement, BAE said it remained committed to "acting on all the committee's recommendations" and would now study the report's findings.

It said: "The committee's publication of this report is an important step towards BAE Systems' objective of achieving benchmark standards of governance in the conduct of its day-to-day business."

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