Goldman Sachs’ CEO, Lloyd Blankfein, has been vilified for suggesting that a firm sometimes associated with “vampire squid” does what he called “God’s work.”  But, if a group of former bankers and regulators has its way, that’s just what big-bank boards of directors will be required to do.  Think about this as taking the investor “say on pay” mandated in Dodd-Frank and turning it into an unprecedented “say on way” mandate that would compel directors to ensure that banks act not in their own self interest, but rather for that of society as a whole.  Taken in concert with other proposals to make systemic banks meet social-utility goals, the governance demand proves that there is a swelling sea-change redefining what banks are and for whom they must act.

The concept of board social responsibility has been bruited about for years, but largely as a bit of fluff firms use to plump up their annual lists of about whom they choose to care.  In the U.S., annual reports dwell long on the general theme of social responsibility – nice pictures abound of happy families of various ethnic groups luxuriating in products purchased with bank support.  But, in fact, the law stipulates only one fiduciary responsibility for directors: to ensure that firms are run in the best interest of shareholders.  This is hard enough — egregious lapses in corporate governance abound as proximate causes of the global financial crisis.  Repairing investor protections  and, along with it, risk management is taking so much heavy lifting that whatever was done for “society” has, since the crisis, been put even farther to the  back of the three-ring binder or, in many cases, left out altogether.

This, though, isn’t the vision of financial-institution corporate governance recently espoused by a very influential organization, the Group of Thirty.  This is an organization of current industry CEOs, very, very senior former ones and top regulators.  Its recommendations are hard-fought, carefully-researched and pack a punch   – with a case in point here the G-30’s call for MMF regulation that sparked the furor now roiling that sector.  When the G-30 talks, the Group of Twenty heads of state listen, as do the Treasury, SEC, FRB and key U.S. decision makers.

So, what does the G-30 say that the G-20 might endorse?  It is simply that boards not only look out for shareholders (as required in the U.S.) and employees (as is often done here and mandated in Europe).  In addition, it says, financial institutions must play a “palpably positive role in society,” going on to discuss in more detail how “well-being” for customers, financial markets and the full array of social interests is to be a core requirement for effective corporate governance at global financial institutions.  The paper doesn’t mandate that financial institutions boost a nation’s “happiness” index – a current econometric fad – but perhaps that’s only because they believe this is implicit in the broader call for social value-added.

Going beyond the clichés of caring about the community to actually running a bank to benefit it is a huge leap in the construct of what private capital is supposed to do.  That the G-30 endorses it is stunning since this group is far from the usual social-advocacy sphere populated by consumer and community groups and all the others who have long pushed banks to be better.  The recommendation speaks to the broad transition already under way in the mission of large financial institutions – redefining them like it or not (mostly not) from regulated private-sector entities to regulated private-sector entities restricted to activities that meet social-utility functions.

Last week, I discussed how this utility model plays out in terms of new products, citing recent calls for an “FDA” to judge if bank products are “good” for consumers and the financial markets.  This is challenge enough to the fundamental premise of private finance, but the G-30 paper takes this even farther.  If it means what it says, then banks and other large financial institutions are to be judged, governed and even required to do what others think is good not just for them, but also for society as a whole.  If anyone of us knew what that really is, perhaps this new mission would make the world a better, happier place.  For sure, though, it will make big financial institutions govern themselves under standards far afield from those investors now expect.