There’s a saying in Chile: “La vaca engorda bajo el ojo del amo”—“The cow grows fat under the watchful eye of the owner.”
I bring up this saying because of a financial scandal we’re having down here: There’s a retail chain called La Polar—fairly big, catering to lower-middle- and lower-income consumers—that’s been caught cooking the books.
Ordinarily, a financial scandal in a second-tier retailer in an out-of-the-way Latin American country doesn’t rate much of a reaction. A shrug, maybe, but that’s about it.
However, it seems to me that the La Polar scandal illustrates something not just about corporate governance, but about political governance as well. And not just in Chile—more to the point, it reflects corporate and political governance in the United States and Europe today.
This trivial financial scandal reflects why the political and economic leadership of both Europe and the U.S. are not acting in the long-term best interests of their countries. Rather, they are acting in the short-term best interests of themselves—to the detriment of the nations they are responsible for.
The reason is simple: IBG–YBG.
Let me recap the scandal first.
The La Polar scandal blew from actually two different directions: On the one hand, consumer protection advocates were seeing how La Polar was unilaterally “renegotiating” store-card balances, and tacking on huge interest hikes, fees and penalties. Some people started complaining how one missed store-card payment meant their balances were summarily “renegotiated” by La Polar—in some cases multiplying what they owed the retailer by three or four or even five times the original amount. A US0 washing machine could wind up costing a lower-income family US,000 when all was said and done.
Consumer advocates started making a fuss about a few isolated cases of this blatant gouging—
—and then promptly discovered that all of La Polar’s store-card holders were being gouged in similar fashion: It was a systematic process.
