(FORTUNE Magazine) – Nobody loves a fink. A snitch. A rat. Well, maybe not. But why then are hundreds of companies rushing to install anonymous hotlines to enable tattlers to tell their tales? Why are companies appointing ethics VPs and writing ethics codes saying that you, dear employee, are "encouraged and expected" to rat on your boss if that honcho is pocketing payoffs or hitting the Stoli too hard or grinding out perilous products or whiling away the afternoons with his tootsie at the No-Tell motel-and putting it all on the swindle sheet, a.k.a. expense account?

Ratting is clearly on the rise. From ADM to GE, from W.R. Grace to the Pru, and in countless smaller outfits that don't make the headlines, people just like you are speaking up. They are going over their boss's head to declare that he--or the whole company--is doing wrong. But that raises the very sticky questions of just when should you consider taking such drastic action (yes, there are times when you'd do better to stay mum), and how should you do it?

These questions are a lot easier to answer if your company has a code that defines unacceptable practice and provides a mechanism--like a hotline to an ethics office--that offers you both anonymity and somebody to talk to. Even then it's not simple. One small group of workers at Honeywell anguished for weeks before reporting a boss for misdeeds. Lee Essrig, Honeywell's ethics officer, says that when the offender was dismissed after an investigation, the group first felt relief but soon were struck by a lingering sense of guilt.

Worse is the experience of three brokers at NationsBank's investment arm. Two of them quit a year ago, feeling that the company was guilty of high-pressure sales tactics and other infractions. When a third, David Cray, went public with those charges in a complaint to the National Association of Securities Dealers, they joined him. NationsBank filed a counterclaim against all three, charging defamation, and the matter is in arbitration. If they lose, they could be fined.

With so much at risk, it seems to me that you have reason to speak up only when you see behavior that is both gross and repeated. Says the ethics officer of a FORTUNE 50 company: "You wouldn't rat on your boss for taking home a pack of Post-its, but you would for taking home a computer. You wouldn't rat on him for having one dinner you knew didn't have any business angle, but you would if it was a pattern."

But before you go over the offender's head to report him, ask yourself seven questions:

(1) Am I totally clean? You can be sure that the person you bring charges against will try to discredit you by turning up any blemish in your record.

(2) If I confront the offender, will he change? Brother Leo Ryan, a management professor at DePaul University, warns that "if you immediately go above your boss's head, you violate his right to explain himself."

(3) Is this behavior unethical or illegal? Richard T. De George, a University of Kansas philosophy professor who has written widely on the issue, says that unless there is danger to others or illegality, "whistle-blowing is morally permitted but not morally required."

(4) If a gross and repeated practice continues, can it cause serious harm to someone--to co-workers, customers, users?

(5) Is there a reasonable chance for success? There's no point in bringing the charge to your boss's boss if that higher-up just ignores it. Consider the 15 women employees of Del Laboratories who received a $1,185,000 settlement in August after charging that CEO Dan Wassong for years had sexually harassed them. So why had they not complained to the board before going to the Equal Employment Opportunity Commission? Says one of the women: "The board members were all personal friends of his."

(6) Will the long-term benefits outweigh the harm? Recall the two Morton Thiokol engineers who back in 1986 courageously warned NASA that the O-rings on the Challenger shuttle were faulty and urged that the mission be scrubbed-the night before it took off and blew up. Had they won that battle, the benefit surely would have outweighed the short-term inconvenience.

(7) Am I prepared to suffer the consequences? They are less severe in companies that have clear ethics codes and anonymous reporting mechanisms. Elsewhere, several surveys show that many whistle blowers are ostracized by co-workers and soon leave the company.

But in the end, there are worse things than being ostracized. Think of how those Morton Thiokol engineers would now feel had they not spoken up.

Reporter Associate Madeline Jaynes