You can actually achieve a happy medium between the two. About 2 years ago I interviewed with one of the large SF-based enterprise companies. They emailed me a cool little assignment (parse a text file that describes dependencies and build a graph, output install manifest) and asked me to send back a solution in an hour and half. An engineer was available to call on the phone to answer any questions, but otherwise I was left alone to code in peace, with no screen sharing or other kinds of watching as I coded.

It's probably the best phone screen/coding assignment experience I've ever had. No pressure from someone looking over your shoulder, but limited in time and scope, so I didn't spend all day working on it.