Kudos to you and your co-workers for attempting something constructive rather than roll over or quit. Personally I would have just made a separate account and gave them the password to that so as not to make waves. I'm impressed that you stood up to better your situation because I probably would not have.
Also it's is great your management was open. I can't imagine the logic behind asking for passwords but I'm glad to read that your management is going to change their password control policy.