1 - Make the shoulder girdle 2 bones and at least have some rotation on the split close to the shoulder socket. Your arm does not just move like robot arm, there are alot of muscles and bones in tandem to get circular motion of an arm
2 - The arm bone actually does not rotate around the middle of the deltoid, it is closer to where the scapula and collar bone meets, try it (move your right arm up and put your left hand just above your right deltoid during the motion) . when the arm all the way up, it should make a dimp there
3 - Smooth the polygons around the shoulder a bit, also play around the direction of the edges.