The European Commission released the eagerly-awaited Green Paper on Corporate Governance this week. It follows on from the Green Paper in June 2010 on Corporate Governance in Financial Institutions, as a result of a strong response pointing out that many of the corporate governance reforms discussed in the FI context were relevant more generally.

Manifest will of course be responding in detail in due course (watch this space for developments on that front), not least because, for the first time, the question of the regulation of the role of proxy advisors is broached at a European level.

The Green Paper is a first formal ‘testing of the water’ for the Commission to effectively confirm the views they have heard from so far on “three subjects which are at the heart of good corporate governance”: board performance; the role of shareholders; and the application of ‘comply or explain’.

The paper also asks respondents to consider two other questions. The first is the question of making the application of rules on corporate governance more nuanced to enable compliance to accommodate differences in the size or type of businesses. The second is consideration as to what provisions might be appropriate for private companies.

In general, this consultation is very open in terms of the questions is asks. Much of the preamble to each topic is possibly the short side of succinct. It is likely to solicit a very wide range of views, which may prove to be a blessing and a curse in equal measure.

As is usual for this stage of a European policy process, it is clear the Commission is not pinning its colours to the pole just yet. However, there may be legitimate concern that some questions require a certain amount of ‘unpacking’ – even at this early stage – not least in light of recent regulatory developments in the UK and France, to name but two.

This is particularly true in the context of the debate on board diversity, obstacles to engagement by institutional investors and the role of proxy advisors. For example, it’s not any more explicit that the term ‘proxy advisors’ includes engagement service providers than it is appropriate to not deal with the similar but separate term ‘proxy voting agent’. Unless there’s agreement about what the Commission is asking about, it is somewhat optimistic to hope for a coherent, constructive set of responses.

On the bright side, this is an opportunity for those at the forefront of a well-functioning, responsible investment practitioner community to elucidate the spirit of what this Green Paper is seeking to learn about, showing it is not necessarily all that difficult to identify.

The (ironic) problem is that those who are most committed to ensuring robust board performance, shareholder engagement and a well functioning ‘comply or explain’ regime are those who will have the least time to devote to responding to this consultation, which runs entirely parallel to the busiest time of year – proxy season.  Deadline for responses is the 22^nd July.