I tend to look the other way on what my employees (and myself by extension) do at work as long as they are getting their work done and being productive. If you can talk on the phone and surf the net at the same time and still do your work accurately, in appropriate volumes, and on time, more power to you.
That said, I had to terminate someone last Friday... seems like he was not only NOT getting his work done but when we pulled the web logs (for back up so we could have a "clean" termination), he was moderating two websites, had designed a half dozen more on OUR time using our resources, and managed to spend a better part of his day IMing on four different screennames with over 60 individuals.
Call me a micro-manager, but THAT is a bit extreme!