A company can set the terms and conditions of the workplace much as it sees fit. This, unfortunately, includes not taking disciplinary action against an emplyee who has been reported to watch pornography during working hours. While not doing so is unusual since most business's would take immediate action for such a thing, it is not against the law to allow a worker to do this. That is so long as such not taking action in this situation violates a union/collective bargaining agreement or employment contract. Also, it must not constitute some form of legally actionable discrimination, which it does not appear to. Bottom line, if no action is taken against this manager, you can either put up with his behavior, complain further but possibly risk your own termination, or quit.