* Generali board meets on Friday to choose new chairman
* Geronzi's exit paves way for better corporate governance
* Geronzi to get 15 million euros exit payment-report
* Generali shares up 1.9 percent, outperform sector
(Recasts with analysts' comments, more details)
By Nigel Tutt and Lisa Jucca
MILAN, April 7 (Reuters) - Telecom Italia's outgoing chairman is the frontrunner to take the helm of insurer Generali , replacing former banker Cesare Geronzi who quit in a boardroom clash, shareholder sources said.
"Galateri is the most likely option," one shareholder source said on Thursday when asked who would replace 76-year-old Geronzi.
Gabriele Galateri di Genola is a former chairman of Generali's main investor Mediobanca SpA.
Galateri, 64, is well-known in business circles but some analysts view him as too close to Mediobanca, the investment bank which owns 13.5 percent of Generali.
Others say Galateri would struggle to bring any fresh perspective to Europe's third-biggest insurer but note the difficulties of finding a new face in Italian financial circles, which are still dominated by an ageing elite.
"Geronzi's departure was a beneficial tsunami for Generali," Kepler Capital Markets analyst Fabrizio Croce said. "Two ideal candidates for the chairmanship could be Leonardo Del Vecchio and Diego Della Valle. They would push the company forward."
Leonardo Del Vecchio, 75, founder of eyewear maker Luxottica , resigned in anger from the board of Generali in February as he said he could not influence the group's strategy.
Tod's boss Diego Della Valle, 57, another Generali board member, was also openly critical of Geronzi and instrumental in bringing forward the no-confidence motion that eventually forced Geronzi to resign on Wednesday.
END OF AN ERA
Geronzi's sudden exit from Italy's No.1 insurer marks the end of an era for the controversial financier, a corporate insider with close links to prime minister Silvio Berlusconi who had formerly led top banks Capitalia and Mediobanca.
He had been seen as a symbol of opaque old-style capitalism for exercising power through his extensive network of contacts.
Italian daily Il Sole 24 Ore said former EU Commissioner Mario Monti, at 68 still a well respected independent figure in Italy, and 73-year-old consultant Roland Berger, who also sits on the board of Fiat, were also among possible candidates for the chairmanship.
Former economy minister Domenico Siniscalco, in his 50s, was cited as a candidate by Corriere della Sera.
Generali's board will meet on Friday afternoon in Rome to choose the new chairman, a source close to Generali said.
Generali chief executive Giovanni Perissinotto, who had clashed with Geronzi, is not a candidate, the source close to Generali said, adding that other Generali board members could also be considered.
Settimio Stigliano, a fund manager at Italy's Arca, said the next chairman should be more in tune with the CEO. "I am not sure if I prefer Monti or Galateri. Either would be OK."
In an unsourced report, La Repubblica daily said Geronzi will get 15 million euros for leaving Generali, including 2.5 million euros a year for the two years left on his non-executive contract. Generali was not able to confirm the report.
On Thursday, Generali shares outperformed the insurance sector, rising 1.8 percent at 0950 GMT, and reducing further the "governance discount" they had been suffering because of Geronzi's conduct and after Wednesday's rise, an analyst said.
At 0826 GMT, the STOXX 600 Europe insurance sector index was up 1.35 percent.
(Additional reporting by Paola Arosio in Milan; editing by Elaine Hardcastle)