The development of a merit pay system in effect since 1953 in a suburban school district is discussed in light of district records and interviews with administrators and teachers. A key element of the system is a standing committee for evaluation of the program, consisting of the superintendent, teacher-elected representatives, and one administrator elected by principals. The operation of the program is described in terms of Dornbusch and Scott's model of evaluation and authority in organizations, which posits six stages of activity in the evaluation process--task assignment, criteria setting, sampling, appraisal, feedback, and planning for improvement. Changes in the system in response to such forces as legal decisions, increased knowledge of effective teaching, and pressure from teachers for refined evaluation criteria have generally resulted in better articulated evaluation procedures. Ten district elementary school teachers interviewed all favored the merit system over evaluation and pay programs, citing as its strengths monetary reward for superior performance, a climate of professionalism, and improved instruction. The teachers perceived subjectivity in evaluations, ambiguity of feedback, and resulting morale problems as weaknesses of the program. Further study of this system is in progress. (MJL)