I've seen companies where this happens, and people have Friday afternoons off because they already did their hours that week. They have 0 loyalty to the company.
Relationships work in 2 directions. If the company treats you like lazy scum, you will treat the company as an oppressive thing you want to avoid.
If the company trusts you, you are less inclinded to breach that trust.
This also works for blue collar workers, just look up Ricardo Semler of Semco.
The scale of the employee's greed make it's actions seem tame at a small scale (punching false times...). They justify it by saying they are getting their dues and for once they are the ones screwing and not getting screwed.
The scale and visibility of a company's greed make it much more apparent that it's incentives and moral compass are way off (mistreating, exploiting...). They justify this behavior as helping the bottom line and making the numbers look good to investors.
Until ALL the actors, both companies and individuals start adjusting their 'morality' and integrity this will continue happening.
How is that a bad thing?
But indeed those employees (programmers, etc) saw that as a benefit of doing no more than 40 hour per week.
Sometimes you might fix that one bug that would haunt you over the weekend otherwise, I grant you that. More often than that, feeling that one has to enable oneself to finish stuff at the end of the week leads to fewer plans on Friday nights, too little socializing outside of work, less restful weekends. And those kill productivity and company culture in the medium term.
In the short term I have seen my share of lost productivity because people feel like deploying hardly thought through changes (if only to internal system) on Friday afternoons to get it done that week.
It was a disaster and lead to all sorts of undesirable behaviors and malicious compliance.
The system of building on trust is a more basic form of reporting, actually more in line with business thinking. Trust is currency and life blood throughout organizations and across them. There's surely some people still doing the agonizing detailed reporting of timesheets, but even consultants are given same benefits of doubt nowadays, as companies tend to use the same system for everyone.
I'm sure the cycle will restart at some point. That situation will be one where employees have much less say in the day to day work and operations again.
If a business isn't capable of supporting it's labor at a rate where their employees can maintain their cost of living, then that business has already failed. It means the business subsidizing the cost of goods and services with the quality of life of the employees providing those goods and services. That's not a sustainable economic model, because it means those same workers are effectively excluded from the economy; they're only able to participate with essential goods and services, which harms the markets for anything else by artificially constraining demand. That means economics of scale won't pay off, which increases the effects of overhead on business.
"Hey team, we worked x hours this month, and our best employee worked 96 ours of overtime! Amazing!"
In your example, the "individual [having] an outsized effect on the group" is the store manager. They need some oversight to ensure they're correctly wielding their power over the timekeeping system and their employees. You could have the next manager in the chain conduct oversight, but then you might end of with the same issue. Better to distribute power to the employees, so no one person can ruin the store, and everyone feels a little more responsible and important.
When I started digging into the data, it became obvious. People were punching in at 08:00 on Monday, and wouldn't punch out until something like 12:00 on Friday (change days as required). This meant that they were clocking 24 hours / day. The only way this could happen is if they were colluding with their store manager, as the manager was meant to close out the time keeping system at the end of the day.
The stores with employees that abused the system tended to have lower margins. This often led to them being closed down. It's not so much the individual being bad that's bad, it's that in industries where profit margin is razor thin, an individual can have an outsized effect on the group.
I expect over time (10s of years) the computer industry will get closer to other professional industries as opposed to being the wild west it is today.