The problem is that most people will slack off. To work remotely, you almost have to have the same discipline that you do when you work for yourself. Most people don't have this type of discipline.
Flex hours/location isn't for everyone. Personally speaking, I believe companies should offer it to everyone and not necessarily restrict it...BUT...let the buyer beware, so to speak. If an employee wants to take up a customized schedule, he or she had better be prepared to do good work under it.