BACKGROUND. Compensation inequity by gender is a problem across occupations in the United States. Most compensation-monitoring efforts in academic medicine have been informal. The authors developed an analytic method for formal, ongoing evaluation of compensation equity in academic medicine. METHOD. A historical cohort study was conducted at Michigan State University College of Medicine using data from 1990, 1991, and 1992 to (1) evaluate methods for monitoring compensation equity, (2) test the feasibility of compensation-equity monitoring as part of administrative information systems, and (3) determine whether compensation inequity existed in a case study of faculty salaries. Internal market adjustments for specialty, clinical or basic science “type,” and calendar- or academic-year appointments were made before establishing a male cohort for each female faculty member. RESULTS. The method developed appears feasible for routine administrative monitoring of compensation equity. When the compensations of women of each type and rank were compared with the compensations of their male cohorts, inequities appeared to exist for basic scientists, but not clinicians, based on a criterion of the groups' compensations being 4% or more below those of their cohorts for two successive years. CONCLUSION. The authors suggest that formal monitoring of compensation equity is an important and feasible administrative undertaking to correct historical inequities. This is an area in which leadership by U.S. medical colleges is needed.