But wouldn't the perception of the employers change over time if they discovered that the people with degrees from that online university were actually well educated?
Obviously, if the material and teaching sucked, or if cheating was rampant, that would tarnish the reputation, but the same could be said of virtually any educational institution.
Of course, if they ever had a reason to change. But they don't, because they don't really have a problem with supply of candidates. They have issues with selecting for quality, but adding tons of candidates with online degrees doesn't help them.
There are potential ways of addressing this, but they mainly involve the online university developing selection criteria just like elite colleges (e.g. everyone can access basic materials, but only certain X performers can access the premium version with company interviews; or they only admit X students per class). Otherwise the value of the degree is diluted and it has no more signaling power to employers. In addition, the online universities will likely attract less capable students, because for very strong students, top tier universities are still very much worth it.
Why do the employers get little marginal benefit selecting from a larger pool, but somehow the universities have no problem screening hundred of thousands of applications?
Obviously, if the material and teaching sucked, or if cheating was rampant, that would tarnish the reputation, but the same could be said of virtually any educational institution.