The Business School is in danger of losing its status as the nation's premier graduate school of business administration, according to statements from a June 1992 address by Business School Dean John H. McArthur that were released this week.

McArthur's comments--his most candid and pessimistic public assessment of the school to date--appeared in previously unreleased excerpts from a speech he gave during a retreat with President Neil L. Rudenstine and several Harvard deans. The comments were distributed to students at the Yale School of Organization and Management.

McArthur discussed the statements as he participated in the Yale school's case study of the way Harvard teaches business administration.

"It would be so easy for our competitive situation to change quite suddenly, and dramatically," the dean said in his comments from the retreat. "We could become an also-ran in our fields of activity almost overnight. Indeed, this is perhaps the most likely outcome over time...And our community is fragile. Very fragile."

"Only a hair lies between our being successful, self-confident, achieving, upbeat, open to change, able to change, generous of spirit, fulfilling for our people...and floundering mediocrity," he added.

McArthur's appearance at Yale--unusual both because of the nature of his defense of Harvard's practices and because it was Harvard that pioneered the case study method of teaching--came just three months after aBusiness Week magazine cover story delivered ascathing attack on the Business School.

The Business Week story alleged that Harvard,the nation's premier school of businessadministration, is "losing ground" partly becausethe case study method is outdated and ineffective.The story quoted several Business School studentsand alumni--most anonymously--as saying that theyare unhappy with the way the school operates.

McArthur said the school, long considered thewealthiest of Harvard's ten faculties with anendowment of $450 million, faces the possibilityof grave financial difficulties. A particularproblem, he said, is maintaining a qualified staffat competitive salaries.

"Compensation and related benefits are veryshort of the levels needed to attracthigh-quality, outstanding young people," McArthursaid.

"We are not competitive in what it takes toattract and hold the interest and commitment ofsufficient numbers of outstanding young people tokeep the enterprise going...They are voting withtheir feet, for careers other than those inacademia."

The dean said starting-level faculty members atthe Business School are paid too little, andsenior faculty members are paid "barely twice asmuch as the lowest paid." He warned of a"bloody-mindedness" that could develop among theschool's faculty and staff if the situation doesnot improve.

"If we drop the reins and simply sit back inconfusion and see how all of this develops, we canbe certain, absolutely certain, that the BusinessSchool will become like other faculties that havethrown up their hands in despair at managing allthis and have drifted apart," he said.

McArthur said the answer to the school's mostpressing problems "will involve money. Lots ofmoney."

"Failure to accept this reality will involveeven more money...as we lose our mission'sdistinctive quality edge and ultimately losecommand of the levels of self-generated resourcesthat have until now been associated with such acommitted group of people as we have enjoyed inrecent years at the School," he said.

McArthur did not return repeated phone callsyesterday