* Outgoing CEO Moss will receive 1.75 mln stg payoff
* "Shareholder Spring" gathers momentum in Europe
* Interim CEO John McFarlane to review operations (Adds details of CEO payoff, review of operations, analyst comment, shares)
By Matt Scuffham
LONDON, May 8 (Reuters) - Aviva chief executive Andrew Moss became the biggest casualty of a growing investor revolt over pay on Tuesday, stepping down after shareholders voted against the British insurer's remuneration plans.
A "Shareholder Spring" is spreading from Britain as investors across Europe become increasingly hostile to big rewards for directors in companies whose shares are flagging. Aviva's are down over 35 percent since March last year.
At a stormy annual meeting last week, shareholders in Britain's second biggest insurer had called on Moss to step down despite his announcement that he would waive his pay increase.
Aviva said on Tuesday he had decided to resign.
"He has finally fallen on his sword after increasing pressure in recent weeks from shareholders and the media over pay and share price performance," said Espirito Santo analyst Joy Ferneyhough.
Investors felt Aviva had failed to recover from the 2008 financial crisis as well as rivals Legal & General and Prudential. The caretaker management signalled a change in tack to build Aviva's capital.
Aviva shares rose. They closed up 0.2 percent compared to a 1.78 percent fall in the benchmark FTSE 100 index.
Moss, who will leave at the end of May, will still get a payoff of up to 1.75 million pounds ($2.8 million) in salary, bonuses, pension and outstanding share awards, a source familiar with the situation told Reuters.
Former Australia and New Zealand Banking Group (ANZ) Chief Executive and Standard Chartered director John McFarlane, who was due to take over as non-executive chairman in July, will take on Moss's duties until a replacement is found.
Acknowledging investor unrest, McFarlane promised a thorough review of all Aviva's businesses and investments. He said he would prioritise building capital and highlighted the need for tighter capital allocation, expense and risk discipline.
"My first priorities are to regain the respect of our shareholders by eliminating the discount in our share price and to find internally or externally the very best leader to be our future CEO," McFarlane said. Aviva said it could take months to identify a new candidate.
One name likely to be linked with the post is Andy Haste, credited with transforming rival RSA during eight years until 2011. RSA made an unsuccessful attempt to buy Aviva's general insurance operations in 2010.
Jefferies analyst James Shuck said a new chief executive would allow Aviva to make a clean break and urged it to sell its British and Canadian non-life insurance businesses.
"While the preference would be to sell the U.S. life business, there are no obvious buyers. There are clear buyers for UK and Canada non-life, potentially improving economic capital to among the best in the sector," Shuck said.
The shareholder rebellion at Aviva mirrored those elsewhere.
More than a third of Swiss bank UBS's, shareholders rejected its remuneration plans last week and there were similar revolts at Credit Suisse and Barclays .
British newspaper group Trinity Mirror's chief executive is to step down after shareholders took issue with her pay package in the midst of falling profits and sales.
Nearly half of bookmaker William Hill's shareholders voted against a 1.2 million pound bonus for its Chief Executive on Tuesday.
Company directors are expected to remain under pressure from shareholders over executive pay even after the market downturn ends with investors and directors saying the days of shareholders routinely rubber-stamping company resolutions at annual meetings are gone. ($1 = 0.6180 British pounds) (Additional reporting by Neil Maidment; Editing by Matthew Tostevin)