Conway's Law. You can lie about your company during the interview. (You probably do, at least a little. In my experience, every company does.) But ultimately, if your company's product is software, you can't fake the quality of the source code. If your teams are dysfunctional, it'll show.
(It can also be apparent in the use of the product, but lots of companies don't make consumer products, so it's not reasonable to expect the applicant to have used your software.)
> Employees always sign stuff to protect the IP. I’d have to go get paperwork from the company attorney to cover non-employees before I can show them anything.
Why? There are very few companies in the world where the source code contains any 'secret sauce'. There's PageRank, and ... that's about the only one I can think of. What exactly are you afraid they'll see? Give me 5 or 10 minutes to look at the source code to Photoshop or Mathematica and I might learn something, but I'll be no closer to launching a competitor, or hurting your business.
What I'm hearing is: applicants are expected to trust you implicitly, while you display absolutely no trust in them. Interviews are already an inherently asymmetric relationship, and you're doubling down on emphasizing your power over the candidate.
Compared to my experience in other fields, this is not normal. It's paranoid and petty on the part of the company, and it's no wonder tech companies have trouble with hiring and retention when they start business relationships this way.
Sure, there may be very few companies in the world where there is 'secret sauce', but the problem is that they all _think_ they have it. If my GC says I can't share IP without paperwork signed then I can't share it - the reason is not relevant unless I have the power or influence in the organization to change the policy. I'm not getting fired over it and (at least at previous companies) I'd get laughed out of the room for even asking.
I'm an engineer myself. This isn't some kind of game I'm playing to pull one over on poor hapless souls - we can argue what ought to be until the cows come home but the reality is that the vast majority of hiring managers have their hands tied by company policy.