BAE Systems Europe’s largest defence company embroiled in a row over a £60m slush fund, has appointed internal candidate Ian King to replaced Mike Turner as its chief executive after an eight-month search.

Two months ago it was thought Dick Olver, the chairman of BAE, was understood to be leaning towards an external candidate as it attempts to break from past allegations of bribery and corruption.

Egon Zehnder, the headhunters, were appointed last year, with Mr King, the company's chief operating officer understood to be the only internal candidate. Mr Olver had been assessing several external candidates.

These included 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.

BAE Systems announced on October 16, 2007 that Mike Turner would step down as chief executive and leave the company at the end of August 2008. Mr King will begin his new role on 1 September 2008. He has been chief operating officer since January 2007.

Mr Turner was last month confirmed as the new non-executive chairman of support services company Babcock International.

Mr Olver said: "Ian is a highly experienced business leader with a proven track record in our key home markets. His performance focus and depth of knowledge of the global defence industry will benefit the continued progression of the successful strategy that has been pursued by the Company during the course of Mike Turner's leadership."

BAE 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 has ruled 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.

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