Your example is largely from the technician's or footsoldier's viewpoint. The scenario you project is a classic example of a manager who does not know how to manage. If your project reporting mechanism relies on a few moments conversation at the coffee machine, you are NOT a manager.
IMHO (and just about any textbook.........but it does work in real life) A manager has certain skills and responsibilities:
1. They must know their staff and their respective skillsets and workrates.
2. They must be able to delegate responsibility to supervisors and team leaders. If everyone reports in to the boss, the boss gets an information overload.
3. They must be able to create a reporting mechanism both formal and informal.
4. They must understand project management and deploy the proper formal tools to facilitate it. Or, at least employ someone who does know (Project Manager & Project Control Officer).
5. They must know how to conduct regular Departmental and project meetings that are informative and productive.
There are plenty of books and courses that go into the details, I have just mentioned a few basic managerial skills that seem to be lacking in your scenario (No criticism of your scenario, just your "manager" :).......yes, I have seen it in real life too! )
You reminded me of an officer's assesment report I once saw, his superior had written:
"His men would follow him anywhere; but only out of curiosity"
I firmly believe in having "Departmental Bashes" at Christmas, after a big project, once a month, or whatever. As well as less official social get togethers: horse racing, ten pin bowling and so on, where people can bring their partners. In this country (UK) that would normally be subsidised if not funded by the Company (UK tax laws make this an attractive employee benefit).
It is not only the Manager getting to know the staff, it is also the staff getting to know each other. Loyalty does not have to be only to the Manager, it should be to the "Team" and fellow workers.
I have not conducted a study, but it would not surprise me if a significant number of incidences of destructive (NOT fraudulent) activity is by workers who have become totally marginalised.
Just a few thoughts