I firstly think that it is very possible to work with friends, even when one is senior to them in the organisation. I'm speaking from experience. As the board director of a pharmaceutical company based at one of the manufacturing sites, I made great friends with people in the labs, the site cleaners, my fellow directors, etc. At least every couple of months I had a dinner party and had a wide mix of them come.
I think professional security and an individual humility are highly important traits all staff should have. I think your line manager, based on what you have said, needs to undertake some management development training. I also think that categorising all people from a certain background together is exceptionally ignorant. Arthur is right, if the staff in conflict do not have the maturity or ability to resolve their issue on their own the manger should get them together to do it.
In terms of putting Filipinos down, my former bosses wife reviews care home standards in Berkshire and she told me that the Filipino staff are the best. I also have a friend who is a Head Nurse at Birmingham's Heartlands Hospital - she told me she would swap 2 of her English nurses for a single Filipino one any day. I also agree with Arthur that Filipino workers are now 'officially' the most sort after employees from a particular country globally.
