The crisis of American corporate responsibility is not the “moral cancer” described last week by Peter Peterson, the former US commerce secretary. Instead, it is something more practical - and more amenable to treatment.

The crisis reflects a breakdown in the fundamental bargain on which business has operated since ownership first diverged from management. That happened with the rise of the public company and the emergence of a cadre of professional managers over a century ago.

Over the years, this bargain - sometimes known as the agency relationship - has helped to produce some great companies, and some great wealth. Those of us who have benefited from it - as employees, shareholders or consumers - tend to take it for granted.

When such an important background assumption is questioned - as it is at the moment - the result is deeply psychologically unsettling. Until it is restored to its former credibility, it is hard to see a restoration of confidence in financial markets or business life more generally.

Mr Peterson’s remarks came as he prepared to head a panel set up by the Conference Board, one of the most prestigious of US business organisations, to try to resolve the crisis.

The Conference Board panel, which also includes Paul Volcker, former chairman of the Federal Reserve, should steer clear of broader concerns about business ethics, institutional leadership or the declining stock market. It would help most by instead focussing on framing a new set of guidelines for the agency relationship.

The bargain that worked so well for so many decades had a number of elements. Professional managers were left to run the company in the interest of the shareholders, within a framework of board oversight, shared accounting principles, and a reasonable division of the resulting financial spoils.

Almost all those elements are now close to collapse, undermined by the recent corporate scandals - from accounting problems to excessive corporate pay and allegations of insider trading. It is in their impact on the agency relationship that the scandals are so significant.

Board oversight has demonstrably failed - at Enron, Tyco, Global Crossing and WorldCom. Yet permitting improper management action is not the only way in which boards have failed to protect shareholder interests. At companies such as Ford, Marconi, Vivendi Universal or Nortel Networks, properly constructed boards have apparently failed to steer the management away from decisions which, though taken perfectly properly at the time, in retrospect have clearly damaged long-term shareholder value.

Investors could be forgiven for thinking that board oversight - no matter how much it is reinforced by formal improvements such as those proposed last month by the New York Stock Exchange - can no longer be relied on as an unimpeachable element of the agency relationship.

Another essential element of the bargain, shared accounting principles, is notoriously close to collapse. The collapse stems not so much from technical dispute about which accounting standards are best - or, as is discussed elsewhere on this page, how best to ensure that they are properly set and audited - but more from a loss of consensus on the true purpose of accounting.

Accounting is now used for something else than its traditional purpose. In the past, it was a tool for the board to assess the performance of managers, and for investors to assess the value of the company compared with its peers. Instead, it has become a means for managers to deliver a steady flow of announcements to the markets in ways that will push up - or at least prop up - the share price.

Although not all earnings management is fraudulent, its long-term corrosive effect on confidence cannot be underestimated. It would be helpful if the Conference Board panel came out clearly in opposition to this practice, even though many of the organisation’s most distinguished members have in the past made no secret of their commitment to deliver the numbers the markets have been led to expect.

Earnings management is particularly damaging when it helps undermine the other element of the agency relationship - a reasonable division of the spoils between managers and shareholders. In recent years, this has clearly broken down in favour of senior managers. The interaction of the management of earnings and lavish share options, which do not pass through the profit and loss account, has allowed managers to divert a disproportionate share of corporate rewards into their own pockets.

Again, the Conference Board panel could perform a public service by identifying the malign consequences of this mechanism, and helping to build a consensus that managerial rewards should be much more modest.

Such steps would help to restore to the agency relationship some of the credibility it currently lacks. That would not usher in a new bull market. Nor would it instantly restore public faith in institutional leadership. But it would help to remove at least one of the looming uncertainties that currently hang over the financial markets and the business environment.

These uncertainties are particularly damaging at a time when the collapse of the late 1990s stock market bubble, which brought to an end two decades of rising share prices, has left so many investors feeling dangerously exposed. Individuals and institutions have a much-reduced cushion of past gains on which to rely. They also sense that current share prices are vulnerable to further declines.

This has produced an edgy and uncomfortable atmosphere. The breakdown of the fundamental relationship between capital and management has started to produce a pervasive mistrust that mirrors the Panglossian belief in economic nirvana that marked the final decade of the bull market.

If the Conference Board panel decided at its first meeting that shoring-up the agency relationship was its most important task, that would be a significant contribution to the discussion on corporate responsibility and values. And Mr Peterson, as co-chairman, could make a personal resolution: to steer clear of doom-laden medical metaphors in future.