For the record, I don't know a whole lot about Poser. 

Is there a way to avoid this distortion in M3's shoulders?

Which body parts have you moved? Just looking, I'm wondering if you moved the upper arm/shoulder, but didnt change the collar.

JonTheCelt

In a word, No. Poser uses an obsolete approach to their rigging that makes it very difficult to get good joint deformations (shoulders are problematic anyway). Let's hope they go the way of most everyone else on how they do their rigging for Poser 8...

Quote - Which body parts have you moved? Just looking, I'm wondering if you moved the upper arm/shoulder, but didnt change the collar.

JonTheCelt

I just used one of the "Universal" poses.  His shoulders look okay when he's standing with his arms stretched straight out.  But the minute I add a pose (arms crossed, or arms by his side) his shoulders balloon upwards.

Oh well.  I'll wait for Poser 8.

The big spherical shoulders are a common complaint about Michael 3.  David 3's shoulders tend to look a lot better when fully down, although you can try modifying M3 if you like.

An example of David:
http://www.renderosity.com/mod/gallery/index.php?image_id=1394881&member

My Freebies

(No Postwork. Click to enlarge.)

You can easily fix joint problems with the P7 Morphbrush.

Left side fixed, right side unfixed.

Another one with both shoulders fixed this time.

(No Postwork. Left modified Luke, right unmodified David.)

And while David is (slightly) better than M3, a ( modified) Luke is actually the best base for an Unimesh based male.

...Unless you prefer to work with M2, who still has the best male default shoulders in Poserland.