There could be a few things causing this; I suggest you, first, answer these questions and then check the subsequent possible causes:
- Is the document in question a document that you have downloaded from a website/server?
If so, then right-click the document, select 'Properties' and check to see if there is an "Unblock" button present; if so, then click it (if you trust the source from which it was obtained) and try again. The reason why this could be causing it to be greyed out is, quite clearly, for security purposes and this is Microsoft's way of protecting themselves against many potentially expensive lawsuits should a downloaded document access a user's sensitive documents/information without their consent and this can theoretically be done when the user selects which documents to compare.
- Is this a Word (.doc/.docx) document or is it in a different document format (.rtf or .htm/.html, for example) and you are using MS Word to view it?
If so, this could also disable the "Compare" function as the document in question is not a native Word-format document.
- Could the "Compare" function (unwittingly) be disabled from somewhere within the settings?
This could be a possible cause; some options are installed as an Add-In and are sometimes not included/activated/installed when a user installs the Microsoft Office suite onto their machine. I would suggest checking the advanced options here as well as the add-ins.
- Is the document marked as "Final"?
If the document is marked as "Final" then almost all options are greyed out / disabled when viewing it. If so, remove/reverse the "Final" status of the document, save, close and re-open to see if this has helped.
Kindly let me know the outcome.