It seems really plausible that the flexibility would lead to resentment. But isn't that reaction negative? What does it take to convince employees, not just management, to look at output?
However all of them will notice if someone arrives late and you don't do anything about it. We had one specific case were someone constantly arrived 2-3 hours late. People very "subtly" started complaining (and I mean very subtly). No one ever mentioned or talked about what the person was working on or if he was producing great code (his code was very good btw). Neither did they asked why he was arriving late - they only assumed it was not OK and felt it was unfair.