Because when you're over-educated they have to pay you more for little or no benefit, or sometimes to detriment. I wouldn't want to work with someone on a project, especially just a typical commercial job, who had a doctorate in engineering. If you haven't been at the university yet, or for very long, you just don't realize how arrogant those people are.
Who says we would be working on standard commercial projects? It seems to me you're thinking too narrowly. If you think the extra education is useless in every case, I think you're beeng foolish. 
It's not only true in software engineering. Clinical psychologists, for instance, are urged to only get their M.S. instead of a Ph.D. or Psy.D. Insurance companies don't want to pay the extra fees to have someone visit a Doctor when a Master can look up info in the DSM anyway.
