The standard audio CD as we know it today was jointly developed by Philips and Sony. Both companies had separately developed their own prototype CD systems, with differing technical specifications, and thus the two systems were incompatible. The two companies agreed to work together to develop a "standard" format which could be used by the entire industry.
The Philips prototype used an 11.5 cm disc which could hold 60 minutes worth of music. However Sony insisted on using a 12 cm disc, which would hold 74 minutes, so that the entirety of Beethoven's 9th symphony could be stored on a single disc.
That's the short answer, although there is more to the story...
Various people connected with Sony have been attributed with insisting on this condition. One story claims it was conductor Herbert von Karajan, who recorded under the Polygram label, a subsidiary of Sony, because Beethoven's 9th was his favorite piece. Another popular story was that is was Sony chairman Akio Morita, because it was his wife's favorite piece. There does not appear to be much evidence to support either of these versions of history.
Most likely it was Sony president Norio Ohga (or Oga) who made the final decision for a 12 cm disc. The decision was a compromise between a disc large enough to hold Beethoven's 9th, and yet small enough to allow for portable CD players, which Sony defined as small enough to fit inside a suit pocket. This particular version does not claim that the 9th Symphony was necessarily Mr. Ohga's favorite. While it may have been, it seems to be chosen simply as an example of a popular piece of classical music. (This particular version of the story is supported by the July 1992 edition of CD-ROM professional, in an interview with Dr. Toshi Doi, by Nancy Herther.)
For what it's worth, most recordings of Beethoven's 9th are not actually 74 minutes long, but 74 minutes will comfortably hold even the slowest renditions of the symphony, while 60 minutes was far to short for even the speediest versions.