Still can't believe that your boss' system is working huh? Oh well.
Instead of being so unbelieving and cynical at "How can this be?", try to see all the GOOD stuff that is happening.
People are coming in late, taking 30 minutes more at lunch...what's the big deal? Maybe they aren't busy at that point in time. Do these same guys give up their nights or weekends when the client has an emergency and come in and bust their behinds for the company?
I worked for a boss (who replaced the old one when he retired) who literally watched the clock. If you left 5 minutes early, or was 5 minutes late, you heard it. Guess what everyone started to do...yup, they waited until 3PM EXACTLY (that was shift change), dropped whatever they were doing, and left. If the work wasn't quite done, well, it was 3PM afterall. The extra effort that people used to put in to finish the job, to help out, to work a little extra unofficial OT was gone. The boss wanted us there 7-3, well, he got it. If someone was sick, or went to a meeting somewhere, our crews were left short - no one wanted to come in to help.
Gee...that's got to be good for the company reputation, not to mention work flow, quality, etc, in the long run?