I guess I'd have to ask what issues we are compelled to force an employer to allow decorations for.
National pride is a BIG thing. It's something we can all share (even though I do understand to a degree where Scott is coming from). But, even more proud for me would be pictures of my kids. Even more proud for my cousin would be symbols of gay pride. Feathers for native people. Buddhist statues for religious people. All are deserving aspects, things we have a right to be proud of and to showcase as much as our nationality. Should workplaces be subjected to it?
Personally I can't see any instance where a national flag on a desk in that nation, no matter which nation (since I seem to recall a recent news blurb about this having happened in the US) requires such an action from the management. But, I can also see where the policy would be derived from.