The No. 1 and No. 3 U.S. public pension funds will work together on corporate governance reforms, but not create a joint office for such initiatives as was previously suggested, Reuters reports.

Calpers, the top pension fund with $164 billion assets and Calstrs, the third largest with $110 billion, will join the state teachers pension system to attempt reforms, especially relating to the independence of auditors and compensation of top executives.

A proposal by California Treasurer Phil Angelides had suggested that the two funds work even closer, but apparently Calpers and Calstrs compromised.

"Any time we do something jointly, I think it magnifies it," said Calpers President Sean Harrigan. "There are real synergies that can be generated."

The Calpers board will vote on the proposal next month. Previously, staff had argued that if a full-fledged joint business between the two pension funds was forged, it would eliminate the flexibility to act unilaterally amid a disagreement.

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