For many Americans, the term “whistleblower” calls to mind the image of Russell Crowe as Jeffery Wigand in the movie “The Insider.” It might be no surprise, then, that a man who has devoted much of his professional life to the topic of whistleblowers should have that particular movie poster on his office wall.

Jordan Thomas, who was an assistant director at the Securities and Exchange Commission (SEC) and had a leadership role in developing the SEC whistleblower program, now serves as the chair of the Whistleblower Representation Practice at Labaton Sucharow, the first such practice of its kind. As someone who is immersed in the topic, Thomas can certainly see how its importance has grown in a short period of time.

“The program is off to a great start,” he says, speaking of the whistleblower provision of the 2010 Dodd-Frank Wall Street Reform and Consumer Protection Act. “Compare it to other programs, like the IRS Whistleblower program, took a long time to get off the ground. In the very short time of its existence, the SEC whistleblower program issued an award in record time.”

Internal or external whistleblowing?

So, from the point of view of the SEC, the program is off to a good start, but what about from the perspective of the whistleblowers themselves, or the inside counsel at companies that are focused on this issue?

Of course, companies would prefer to have no problems that would warrant whistleblowing in the first place. But, if workers do have an inkling that something untoward is happening, they have two primary options: reporting internally or externally. Due to the considerable risk of prosecution, sanctions and damage to reputation associated with whistleblowers who report to the SEC, businesses would certainly prefer if matters are handled in house.

According to Jon Rydberg, CEO of compliance consulting firm Orchid Advisors, corporate culture is one key factor in encouraging whistleblowers to report internally. “The rank and file and middle management have perceptions of senior executives, they could be positive or full of animosity. Organizations can shift culture or tone from top down in one direction or another.” Culture and morale are clearly a factor, and, in cases where employees do not trust leadership, they are more likely to go outside when they have to report.

Thomas echoes this idea that corporate culture is essential, stating that every organization should strive to establish a culture of integrity. One issue that stands in the way of this, however, is the perception that those who bring wrongdoing to light will be penalized rather than commended. According to a survey by the Ethics Resource Center, 24 percent of people reporting internally feel that they have faced retaliation.

This, says Thomas, shows a disconnect between businesses that claim to promote ethics but fail to do so in practice. “If 24 percent perceive that they are being retaliated against, words are not consistent with actions. There is then a deterrent impact on people coming forward in the future. They talk to friends and it gets to everyone. If people say they faced consequences, all of a sudden, word on the street is not to report internally.”

Enacting corporate culture

But the corporate culture does not just come from the top down, Rydberg points out. “Executives turn over every three to five years, so the middle of an organization has a greater ability to influence and build trust than the top,” he says. “The CEO only speaks to five or six people,” but middle managers can speak to thousands.

Thomas points out that there are many practical steps that companies can take in order to create an environment where employees can feel comfortable reporting within the structure of the company. Communication, for example, is a key component. “Think about how you communicate with whistleblowers. Conveying that the organization appreciates someone coming forward and takes the matter seriously, whether it is real or not.” That combination of appreciation, taking matters seriously and appropriately addressing problems goes a long way toward solidifying the otherwise intangible quality of ethics.

Making it work

Companies have a knee-jerk reaction to personnel issues, with many stating that they won’t talk about such matters, but in the case of a whistleblowing situation, a small bit of information can go a long way, says Thomas. If the person who thinks that something is wrong gets the impression that no action is being taken, he or she may perceive disrespect or disinterest.

Also, Thomas recommends that companies take the time to follow up with the whistleblower, checking to see if everything is okay, if they feel as if they have been retaliated against by any level of management and the like. “You may need to protect them; you may need to clarify misunderstandings,” he says. In this way, management can identify potential problems—a project reassignment, for example—that could potentially be misconstrued.

Rydberg also has practical recommendations to encourage employees to bring concerns up the internal chain of command. Outlining the escalation channel is key, as is having a clear and formal policy for handling reporting. “Think it through to the end,” he recommends. Know where the information goes, who handles that information and what steps need to be taken in different circumstances.

Clean as a whistle

Though not all instances of whistleblowing would warrant a feature film, companies would certainly want to avoid any situation that could smudge their reputation. Thomas notes that the chief of the whistleblower office at the SEC is actively looking for cases that involve corporate retaliation against a whistleblower. “Can you imagine being the first company to get hit with that?” he asks. “You don’t want to be in that situation. It undermines that culture of integrity, so responsible organizations should get their arms around these issues.”

One unique piece of advice that Rydberg has for general counsel is to “make it fun.” He says that honestly, yet another communication from the legal department has the potential to fall on deaf ears. If you market your compliance program and make it interesting, then you might have something there.