The concept of merit compensation is clarified from both administrative and faculty perspectives, and the conceptual sources of the controversy surrounding "merit" are addressed. Using the lexical tradition of the verb "to merit," four distinct semantic components are identified: to earn, to deserve, to value or give preference, and to obtain one's share. A Venn diagram is used to illustrate the full semantic domain of this verb. Up to 1960, the dominant ethos that motivated and guided academic administration was that of the guild of scholars. Given the current business ethos of college administrations, the verb "to merit" is construed to mean either "to earn," or "to deserve," or "to value or give preference." Therefore, merit compensation may be construed to be whatever a faculty salary schedule reads, perquisites of status, or a prize for performance, analogous to the bonus in business. However, faculty, who have not given up their guild orientation, construe "to merit" to mean "to earn deservedly that which is valued." Merit compensation is understood by faculty to be a deserved earning reflecting esteem. It is recommended that campuses develop a common axiological language and shared hierarchy of values. (SW)