Why isn't Google Chrome showing the proper encoding?

If it pastes back as the expected character, then it is not an encoding problem - it rather would be a font problem: you likely have a font installed in your system that is being used by Chrome to display S.O. (and possibly other pages' text). If this font is broken (like, it has an incorrect encoding declaration itself), this could happen.

The workaround is finding out which is the offensive font and uninstall it from your system.

I had the problem with Chrome on Mac OSX.7.5 using Universal Type Client.

In Chrome go to pop-out side menu (3 horizontal bars) > Tools > Encoding and set the page to Auto-detect, UTF-8 (you should switch auto-detect off if it's slowing the browser down).

In Universal Type Client, there was 2 versions of Arial in conflict with each other.

Select the universal copy of Arial and deactivate it.

All pages now render correctly in Chrome.