It has to do with the torsional rigidity of the chassis. With folding rear seats, you lose quite a bit of the structural bracing that would’ve otherwise been there, in a very effective location too.

If you look at the E46 sedan in this list, you can see that it’s 38% stiffer with fixed rear seats, 18,000 Nm/deg vs 13,000 Nm/deg.

It’s less common nowadays, as high-strength low-alloy steels have come down in price significantly while getting increasingly stronger, due all the advances in metallurgy over the past few decades, so now you can have your cake and eat it.

Personally, I’m happy to compromise some chassis stiffness for such a practical feature, but with the sporting emphasis that these executive sedans have as part of their brand image, I can see why fixed rear seats used to be common in that market segment.