* Chairman quits Industrivarden board
* Move comes after debate over use of jet, cronyism
* Anders Nyren proposed as new Industrivarden chairman
* Handelsbanken CEO to become chairman of bank (Updates with details, background, quotes from chairman)
By Johan Ahlander
STOCKHOLM, Jan 22 (Reuters) - The chairman of Industrivarden left the powerful Swedish investment group on Thursday after a spate of media reports alleging lavish spending of corporate cash on luxuries such as hunting lodges.
Industrivarden has large holdings in Swedish firms including truck maker Volvo, telecom equipment maker Ericsson , engineering firm Sandvik, banking group Handelsbanken and construction firm Skanska.
The departure of Industrivarden Chairman Sverker Martin-Lof, 71, in turn triggered a management overhaul at several of the major companies in the investment group's portfolio.
Martin-Lof was scheduled to step down at Industrivarden's general meeting in 2016 but said his position at the 70-year-old investment group had become untenable after the media scrutiny.
"It is better to not prolong this agony any longer than necessary," the told news agency Direkt.
Industrivarden said in a statement confirming Martin-Lof's departure that Anders Nyren, chairman of Handelsbanken , would take over as Industrivarden chairman.
The investment group has struggled to emulate the success of other Swedish holding companies. Its shares have risen 45 percent in the last three years, while the Wallenberg-controlled group Investor climbed 110 percent.
Newspaper Svenska Dagbladet reported earlier this month that hygiene products company SCA, chaired by Martin-Lof since 2002, built luxury hunting lodges in northern Sweden for the use of company executives.
The Swedish daily said chefs were flown in for lavish dinners, a corporate jet was sent back empty to Stockholm to pick up a forgotten wallet and hunting dogs were ferried in by helicopters.
Martin-Lof was not available for comment to Reuters on Thursday.
SCA said earlier this week it had changed its policy regarding the use of company planes.
Ostentatious wealth and lavish spending by companies is often frowned upon in Sweden, a country known for its egalitarian image. The spending revelations also sparked debate in Sweden over how control of boards within the Industrivarden group has been held by a small number of executives.
Industrivarden said in a statement its owners had taken note of the recent debate and would make changes.
"The intention is therefore that the following principles shall apply in the future: Senior executives of portfolio companies shall not serve on Industrivarden's board," it said.
Industrivarden said Handelsbanken's Chief Executive Par Boman would be proposed as the new chairman of the bank, the new chairman of SCA and as a new director of construction group Skanska. A new CEO of Handelsbanken will be presented well before the AGM in March.
"It will be an internal recruitment. Other than that I have no comment," Nyren told Reuters. (Additional reporting by Helena Soderpalm; editing by Mark Potter and David Clarke)