A corporate culture that encourages employees to feel comfortable reporting problems internally is the most effective way to discourage whistle-blowers from first going to federal agencies, legal experts say.

Whistle-blowers are a looming problem for companies, particularly given generous awards granted to date, including the recent $104 million award to an IRS employee.

Particular attention has focused on whistle-blower provisions of the Dodd-Frank Wall Street Reform and Consumer Protection Act, for which the Securities and Exchange Commission adopted final rules last year.

In a related development last week, President Barack Obama signed into law the Whistleblower Protection Enhancement Act of 2012, which protects whistle-blower federal employees. The measure amends the scope of protected disclosures, tightens requirements for nondisclosure agreements, expands penalties for violating whistle-blower protections and establishes a Whistleblower Protection Om-budsman position in certain federal agencies.

Under the SEC's program, whistle-blowers are entitled to an award of 10% to 30% of the monetary sanctions collected in actions brought by the oversight agency. The SEC made its first payout of $50,000 under its whistle-blower program in August.

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Headline-making cases with significant awards “have generated some buzz among plaintiffs' counsel,” said William J. Tarnow II, a partner with law firm Neal Gerber Eisenberg L.L.P. in Chicago.

“It's become a huge industry for the plaintiffs bar,” said Michael E. Clark, special counsel with Duane Morris L.L.P. in Houston. “You're looking at having, potentially, plaintiffs' lawyers directing employees to grab documents ... and, if the government gets involved, subpoenas and search warrants. It's a parade of horribles for companies.”

“It would not be surprising to see an upsurge in the number of claims that whistle-blowers are filing, now that the government has incentivized those re-ports with monetary benefits,” said Andrew T. Wise, a member of Miller & Chevalier Chartered in Washington.

“It's a significant question for companies, particularly because the whistle-blowers are not required to notify the company before they bring it to the SEC, so the company doesn't have an opportunity” to either fix the problem if there is one or explain why if there is not a problem, said Thomas O. Gorman, a partner with Dorsey & Whitney L.L.P. in Washington.

Steven J. Pearlman, a partner with Proskauer Rose L.L.P. in Chicago, said whistle-blower complaints are “one of the most troubling issues” confronting employers because, while these cases pose a financial risk, “many employers have an even greater concern on the reputational risks these cases pose to them, and those risks are enormous.”

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Jacob S. Frenkel, an attorney with Shulman Roberts Gandal Pordy & Ecker P.A. in Potomac, Md., said if a whistle-blower goes outside to report a complaint rather than using internal processes, it is a business disruption and leaves the company without “the opportunity to get the credit that it deserves for the appropriate compliance response.”

A corporate culture that encourages reporting is the most effective way to encourage workers to report issues internally, legal experts say.

“You have to instill that culture from the ground all the way to the top in the C-suite, so that everybody gets the message, "We take this very seriously,'” Mr. Clark said. And follow up complaints and provide feedback as to what the company is doing “so it doesn't look like a whitewash,'' he said.

Robert D. Rose, a partner with Sheppard Mullin Richter & Hampton L.L.P. in San Diego, said, “A lot of people become whistle-blowers reluctantly because no one listens to them, because they feel they will be punished if they speak up.”

Firms need a corporate culture that removes “some of the intimidation and fear” that occurs when an employee raises an issue, said W. Gregory Valenza, managing partner at Shaw Valenza L.L.P. in San Francisco.

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“Employees in general want to feel that they can talk to you,” said Jordan Eth, a partner with Morrison Foerster L.L.P. in San Francisco. “But if they feel frustrated, they don't see an outlet” and are discouraged, and “that could push someone” into becoming a whistle-blower, he said.

“Employers need to view whistle-blowers as assets rather than as Benedict Arnolds,” Mr. Pearlman said.

While companies should see whistle-blowers as acting in the company's best interests, that is “a different mentality than what we've seen for decades,” he said.

Experts say that with the right culture in place, companies can encourage whistle-blowers to report their complaints internally by using appropriate procedures and processes, including anonymous hot lines, appointing a member of management to handle complaints and effective training.