At the Harvard Business School, which was long regarded itself as the West Point of business education, the faculty and staff are used to criticism, particulary from what they consider upstarted business schools trying to make a name for themselves.

Stanford University, for example, has recently claimed superiority for its graduate business school, often citing weaknesses in the case method system, the time-honoured teaching method used at Harvard.

But the very foundations of the business school have been shaken by the latest criticism, which comes not from another school, but from "across the river," as they say at Harvard, from Derek Bok, the president of Harvard University.

Virtually all of Bok's annual report on the university to Harvard's board of overseers was devoted to the Business School, which he said must make a greater effort to prepare its students for a series of difficult problems they will confront as corporate executives.

The messsage was well reaearched and fairly clear, at least to those who read it at the Business School. Bok stressed four problem areas:

The growing need to define more carefully the ethical standards and social responsibilties of corporations and their executives. "Professional schools," Bok said, "have a higher calling that derives from their ability to be thoroughly informed about their profession, yet sufficiently detached to examine dispassionately its larger responsibilities to society."

The need for improvement of the relationship between business and government as "corporations inter-act with many more government agencies, and presidential policies, executive orders, legislative acts and administration regulations come to affect the most basic decisions of the firm and cost large sums for compliance."

The growing need for more attention to corporated planning as business becomes more complex because of "the growing diversification of firms and their increasing penetration into foregin markets. . . Executives must worry about may more products and national markets. The variable they must consider are no longer simply the familiar changes in consumer tastes, technology, competitive behavior, and aggregate demand but the possibility of costly new government regulations and the impact of changing economic policies, OPEC decisions, and even foreign coups."

More attention needs to be paid to "human resources," Bok noted, because of the growing diversity of workforces.

The suggested areas of study seem obvious enough, but the proposal was seen by many junior faculty members as a challenge to the sacred case method and their efforts in the areas cited by Bok.

Further, Bok called for increased devotion to research for the B-school faculty - a suggestion that particularly irked many of the faculty.

For his part, Bok said he was taken aback by all the publicy the report received - far more than any of his previous reports.

It was noted, correctly according to Bok, that the report was the kickoff of his efforts at selecting a new dean of the Business School. Present Dean Lawrence Fourake, 55, has long made known his intention to retire (See HARVARD, F2, Col. 1) HARVARD, From F1) by early next year and return to teaching. And, perhaps the single most important job of the president of Harvard is to name, single-handedly, the deans of each of Harvard's schools.

"Every school should have questions they are asking," Bok said in an interview last week. "My job is to raise them. It is up to the faculty to answer."

He said his business school "is the best in the country, and has done more than the others to address the issues I mentioned." But, he added, there should be a continuing reevaluation process.

To say the least, several professors at the B-school wondered what Bok was talking about, in light of the school's efforts in the areas he cited.

For his part, Dean Fouraker didn't take the criticism lightly.

"If Derek has misperceived anything," Fouraker said, "it is the role research plays in our teaching." Fouraker contends that teaching the case method in the B-school, unlike the case method at the Law School - where Bok once taught - is a form of research.

The average B-school student at Harvard is more than 26 years old, and often has spent 2-5 years in industry. Thus, Fouraker points out, the perspective that student brings the school and case discussions is a valuable one, frequently with important in-sights.

"One thing that troubles me and many of the faculty," Fouraker said, "is the implication in his report that Bok doesn't have a high opinion of businessmen. If businessmen are not appropriate models for business students, we shouldn't be here."

Fouraker criticizes other business schools for overreliance on social scientists as teachers and authors.

"Academics as role models would get a lot of resistance here," he said, "because we have to be more practical than that."

Fouraker is proud of the B-school's progress during his tenure - the 1970's. "There have been good years for the business school," he says. "Women and minorities didn't have a chance here before, now they are an integral part of our program."

In any case, Bok called Fouraker to apologize about how his remarks had been perceived. "It wasn't his idea to publicly criticize the B-school," Fourtaker said. "But many of our people took it that way." CAPTION: Picture, Ivy climbs the walls of Baker Library, at the heart of Harvard Business School.By Larry Kramer - The Washington Post