JOHN McFarlane, the Scot who chairs troubled insurance giant Aviva, has acknowledged a "fundamental problem" with executive compensation as its reshaped board faced complaints about pay levels and 12.8% of investors failed to back its remuneration report.

At Aviva's annual shareholder meeting in London, Mr McFarlane won plaudits from shareholders for his stint as executive chairman last year when he began an overhaul of the company after the departure of chief executive Andrew Moss.

But proceedings were briefly disturbed by a lone protester clambering on to the stage waving a banner criticising the company, and were punctuated by repeated investor complaints about board remuneration.

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Executive pay, Mr McFarlane said, is "too high and keeps going up".

The former chief executive of Australia and New Zealand Banking Group said that since he left executive life in 2007, pay is "about double" what it was but "returns are not".

Aviva's pay report was defeated in an advisory vote last year, leading Mr Moss to quit.

Mr McFarlane, who receives £550,000 a year as non-executive chairman, said he rejected the offer of being paid more as an executive for the six-month period he headed Aviva after Mr Moss's departure.

After making a £3.1 billion loss for 2012, the company paid no annual bonuses and froze pay for top managers.

But many shareholders demanded further reform after seeing the company's share price halve since 2008 and being told in March its dividend would be slashed by one-quarter.

Philip Meadowcroft, head of the Norwich Union Policyholders Action Group, praised the "courage" of Mr McFarlane in becoming executive chairman in July.

He said: "Shareholders should be relieved you stepped into the breach to relieve the huge mess we got into. Bonuses are for stellar achievement, not just for turning up to work."

Another investor was applauded after calling for executive pay to rise and fall in line with dividend payments.

Chief executive Mark Wilson, who joined in January having run Asian insurer AIA, said: "If patience is a virtue, then I think Aviva's shareholders are on the way to becoming saints."

However, remuneration committee chairman Scott Wheway signalled the bank would still hand out big packages, noting "Premier League footballers and the best lawyers command high fees".

Several shareholders called for Mr Wheway's resignation amid unhappiness at the generous severance package handed to Mr Moss, and the estimated £2.4 million received by former Standard Life executive Trevor Matthews for just 14 months of work.

Aviva said it had not reached a decision on an exit package for Mr Matthews.

Mr McFarlane defended Mr Wheway. He said: "I would say having been on a remuneration committee at Royal Bank of Scotland in recent years, since the Government has been involved, it is not something you volunteer for as a director."

Mr Wilson said his focus would be on generating more cash to finance dividends.

Since last summer Aviva has sold several businesses including its US arm and launched a £400m cost-cutting drive. He said: "I want Aviva to be stronger and faster, more athletic, more agile, and better able to spot the gaps in the market."