what would you do?

Well I would be mad indeed and let him know that what he is doing is wrong..

I think that is the perfect time to have a private litle chat with the child, not to get upset or show any emotions as if the child was doing something that wrong....

I can't say that it is wrong if we saw him doing that way. We can say it as part of being a child or in a childhood levels. But, maybe the best thing is, we should teach our child how to handle private parts in our body. Or to distinguish public and private activities that must be superseded.

It depends on the age of the child. Any child not mentally hindered, over the age of 8, should be chastised, with an explanation of why it is wrong to behave that way. If the child is younger, they are naturally curious. Seeing the problem, it is OK to patiently explain to them why people don't do such and such. It's also a good time to have that talk where you explain to your child, if anyone but mommy or daddy touches you where you take a bath, you need to tell mommy or daddy. Children need to know what to do if another child or adult becomes inappropriate. I would like to think kids knew what to do if something like that happened.