How much of off-the-work activities of employees should an organization care about?

How much of off-the-work activities of employees should an organization care about? It looks like there is no clear law around this. The question of whether to fire or keep an employee in case of a conflict between the off-work activities and organizational policy/decision is entirely based on the nature of the conflict (or the conflict of interest). Last weekend I was talking to an old friend of mine. We worked in the same organization when I was in India. Since then he has left for a smaller organization near his home town. Being in the small city he feels that colleges nearby do not teach practical aspects of software development to their students. So he wants to start teaching practical software programming on weekends. Noble intention. The only problem is his organization may not absorb this news nicely. In the past, an employee had been warned for trying to start such a teaching venture.
The question here is how much freedom and privacy an employee should have off the work. Does teaching a bunch of college kids on weekend create a conflict of interest with the nature of business the organization is involved in? I understand when a person dives into another money making part time business, he might spend time thinking about it and stealing time from his work hours to do few items for the part time business. That definitely reduces productivity. But aren’t we already allowing productivity reducers like social media in our workplace?
In my opinion, teaching the college grads does not create a conflict of interest. Rather, it will help his employer and other organizations around the town with ready to hire skilled kids who already know a little bit about the practical stuff they will work in the future. According to a research survey, 80% of engineering college graduates in India are unemployable. So equipping them with some kinds of practical skill is really a help to the society. Big organizations should actually implement this as a part of corporate social responsibility.

*** This editorial was published in Testing Circus Magazine – January 2016 edition.