The issue at hand is a very tricky one. It touches the very roots or liberty and freedom of expression on one hand, and the right of a company to make sure that it's employees are productive, use their time at work judiciously and at the same time do not leak or distribute information that is intellectual property or crucial to its operation and profitability. I shall examine both the aspects of the issue and present supporting facts wherever applicable.
As an individual, it is the right of every employee that he or she be allowed the freedom of expression, whether oral or written. It is also the right of an individual that his or her privacy is not intruded upon, whether directly or indirectly. These are the very fundamentals of democracy and are issues for which several have sacrificed their lives. The freedom of expression and right to privacy are hard earned privileges and any regulation or practice that infringes on these rights directly violates the principles of democracy. It also is pertinent to compare the practice of examining employee's emails with say the practice of examining their mail or for that matter searching their cars or house or conducting a physical search to make sure no information is smuggled out hidden on one's person. I am sure most would agree, that such practices are unwarranted and are likely to undermine the morale of a person.
On the other hand, an organization has the right to protect it's investment. It has the right to make sure that no employees leak intellectual property or other such information that is crucial to the functioning of the organization. If such an information leak were to happen, it can result in substantial loss in revenue as well as credibility of the company and hence it's brand. A very relevant example is that of a coca-cola employee, who tried to sell the formula of one of the popular coca-cola brands to it's competitor. In this case, the competitor was ethical enough to pass the information to law-enforcement agencies and coca-cola. However, this could easily have resulted in a huge revenue loss and irreparable damage to the Coca-Cola brand. In light of such arguments, a company seems justified in monitoring email correspondences of it's employees.
So what could be the solution to such an intriguing problem ? I believe a company can put several safeguards in place to minimize leaking of information by it's employees. A background check of every employee will ensure that they do not have any criminal background. Classification of information and restricted access to classified and highly classified information should also help. Another strategy that can be institutionalized could be compartmentalization of important information. In such a strategy, no single person has access to all parts of a classified information, but only a part of the information that is relevant to his or her functioning. There can be several such measures that could be adopted to reduce the risks associated. However, no amount of measures can be completely foolproof and there remains the possibility of information leak, albeit very small. For such situations, there is always a legal recourse.