This monograph takes a detailed look at higher education faculty compensation policies and the role of these policies in improving and preserving the professoriate and the higher education enterprise. A section on compensation structure examines key decision points involved in determining appropriate structures, collective bargaining agreements, and retirement and early retirement issues. A section on factors that affect the structure of compensation looks at the academic labor market, external issues such as the expected drop in numbers of senior faculty due to retirement and the possible lack of replacements, and internal issues such as the role of faculty as independent professionals. A central section looks at how institutions can use compensation to motivate faculty, reward productivity, foster teaching and research, recognize rank and seniority, facilitate productivity throughout a career, and recruit and retain faculty. This section also treats the prevalence and uses of supplemental compensation. A section on equity looks at how hiring pressures have increased with demand for more sophisticated policies and procedures to deal with gender, race and age factors. This section treats legal and regulatory development and various approaches to meeting these requirements. A final section on building an effective compensation system argues that policy must address internal consistency, external competition, individual contributions, and system administration. Includes an index. (Contains over 200 references.) (JB)