If I pay someone $100 to come clean my house and they take my money and don't clean my house, its no different than if they came into my house and stole $100. It's legally different, but there's harm being done and I consider it theft. It's not complicated.
In regards to slacking, there's no expectation that someone is working 100% of the time and no reasonable person would expect that someone is working 100% of the time. But a reasonable person would expect that they work some of the time, perhaps a reasonable amount based on the work of their peers.
> Most managers would expect you to share in terms of how it affects you, not some vague air of "they don't do anything":
I've been a manager and worked with lots of managers. I strongly disagree and this is not what I've seen. They want to have more information about efficiency and happiness on the team that they're managing. And they certainly want to know if someone is not working... at all... for over a year...
You can tell them and if they say "don't care", so be it. But a reasonable manager would want to know. I don't know if you've ever been in a managerial role, but I suggest you have a talk with superiors about this hypothetical and get their opinion on it.