A group of BAE shareholders has called for the resignation of chairman Dick Olver and senior independent director Sir Peter Mason, after a proposed merger between BAE and Franco-German aerospace giant EADS collapsed earlier this month.

In a letter to the board, Invesco Perpetual was joined by two other major shareholders in expressing their concern over the “significant damage” caused by the failed deal, reported the Financial Times

The letter went on to declare that the board had lost credibility with investors as a result of their “misguided” strategy in the wake of the aborted merger.

The group, which holds an estimated 18 per cent stake in the business, said that fresh management is needed to set BAE on a different trajectory, complaining that the defence giant had been too reliant on mergers and acquisitions to promote growth under Olver.

“I cannot see either man lasting up until next year’s annual meeting. This is a company that needs a much clearer strategic dimension, and it is not clear that these men can provide it”, an investor told the Financial Times.

BAE said in a statement that it remained fully supportive of its directors:

"The company is aware that a minority of its institutional investors have recently made public their own views on board succession planning, which differ widely from those of the board and the majority of the company's principal shareholders”, the statement read.

"The company intends to continue with its established succession plans described in its last annual report, including the appointment of a successor to Dick Olver as chairman following an appropriate process to identify the best candidates."

The BAE-EADS merger would have created a pan-European defence titan with combined sales of around £60bn and a labor force of around 200,000.

The deal collapsed earlier this month amid wrangling between French, German and British governments over their respective holdings in the proposed company.