I imagine it's patently obvious to everybody that leetcode grinding tells you nothing of value. I question the actual experience of anybody that didn't find that out yet.
I believe people put it in interviews because they need some metric, and hey, it's a metric. Quite like the constant attempt on estimating the work done on some software.
Personally, I'd be happy to see a single place where management doesn't do the "we need a metric, this is a metric" dance in some context.
Anyway, it's hard to say somebody is an incompetent idiot when literally everybody does the same thing. It's certainly caused by some structural feature of companies.
I believe people put it in interviews because they need some metric, and hey, it's a metric. Quite like the constant attempt on estimating the work done on some software.