If I understand it correctly, if you are Serco, for instance, and start attacking other Serco or Serco bases, you lose faction with Serco. Why not extend this to the whole range? If someone is respected or admired by TPG and you kill them, your faction with TPG goes down. If they're disliked or hated, your faction with TPG goes up. And likewise across the board. I'd also suggest adding orange or something to radar as someone might be both hostile and ally. Essentially a caution color indicating faction could go up in some areas and down in others if you attack that person.

It would make the game make a bit more sense, right?

It's actually like that right now, except your standing with a faction is only affected by what you do in space that that faction is monitoring. If you kill a ship with high TPG standing in TPG monitored space, you will lose TPG standing. But TPG and the other corporate factions only monitor the sectors they have stations in. I've been meaning to write a suggestion about monitored space & how it applies to various things, but haven't gotten around to it yet.

But I do think the faction standing system needs a bit of an overhaul. See these previous threads for some of the discussions on problems & improvements (and these are only some of them, it's something of a hot topic):
http://www.vendetta-online.com/x/msgboard/2/10724
http://www.vendetta-online.com/x/msgboard/3/10089
http://www.vendetta-online.com/x/msgboard/3/10056
http://www.vendetta-online.com/x/msgboard/3/8793
http://www.vendetta-online.com/x/msgboard/3/8746
http://www.vendetta-online.com/x/msgboard/3/8543
http://www.vendetta-online.com/x/msgboard/3/8122
http://www.vendetta-online.com/x/msgboard/3/7870