Thinking like an engineer, from the companies perspective, its just a filter.

While it could be the case that candidate A who passes the coding interview makes a terrible employee, while candidate B who does not pass the interview would make a better one, it doesn't matter. As long as the pool of candidates who pass the coding interview, fares better than the pool who does not, it will be a useful tool until someone comes up with a better one.

And the alternatives were worse. There was a time where unless you graduated from a top-flight school, or were top X% at one of the better state schools, or had some other "in" (e.g. knowing somebody) the cool kids at the time (Microsoft/Apple/Yahoo/Intel/etc.) wouldn't even talk to you