Some thoughts on punishing kids

I had a talk with mom on the phone this morning and something she said about my nephew really concerned me. My nephew has, in the eye of his teacher and my brother's and sister-in-law's, been in a lot of trouble in school lately. A couple of fights with another boy and numerous times violating school regulations. Most recently, he was caught eating chocolate when the class is doing a computer test. To punish him, his teacher made him stand in front of his classmates for the rest of the test, and of course he was not allowed to complete the test. When I heard that part, I was like 'what the heck? What kind of a teacher would do that to a kid?' Does she think humiliating a kid in public would make him realize what he's done is wrong and learn to play by the rules. That's definitely wrong thinking. What is worse is my brother and sister in law seem to be upset and get mad, even punish my nephew every time they heard some bad news from the teacher about him. Both my nephew's teacher's actions and his parents' concern me deeply. I'm really worried about my nephew. Now everyone sees him as a disruptive kid while in fact, he's just a nice boy, just like any other kid who's still learning how to behave. I wish I could tell my nephew's teacher and his parents how wrong their thinking is and how negatively that's gonna affect my nephew.
Most of us adults seem to forget that our kids are still learning how to function in this world including how to behave towards people around them and have only us as their guide and support. In stead of listening to them and guiding them through the process, some of us expect them to have correct behaviors right from the beginning. If they do something wrong, we punish them. As simple as that, and we believe we've taught them to be better. No, what we taught them was mistakes are unacceptable. They will get it that when they do something wrong they'll be punished and not necessarily know why their action is wrong. If instead, my nephew's teacher let him finish the test and later on talk with him, showing him why it's not ok to eat in class, or better yet, seize that opportunity to model to all the kids the expected behavior then chances are my nephew would not feel humiliated and resent school even more.
Labeling kids is the worst thing in the world. Yet people are doing that to my nephew including his parents. Just a few school rules violation and now he's become THAT disruptive kid. By doing that, we're helping to lower the child's self-esteem, and eventually he will become truly disruptive.
Through the story of my nephew, I see how some adults rush to correct an unexpected behavior and, therefore, fail to see mistakes as opportunities to help our child to learn how to function in life. Sigh... Kids might have reasons for doing things that if we take a moment to listen to them, we'll realize that it is not as serious as it might appear, or that it's just the kid's misunderstanding of something.