It is not the value of your standing which is increased by 4% per level of Connections; instead, the difference between 10 and your standing is decreased by 4% per level of Connections.
Then the equation is as follows:
- (Effective standing) = 10-(10-S)*C
- S = existing standings
- C = 1-(0.04*Connections Level)
Example: S = 3.03, Connections level of 3.
- 10 - (10 - 3.03) * 0.88 = 3.8664
- (10 - S) is the difference between your standing and 10.
- Δ = (10 - S) * C is that difference reduced by 4% per level of Connections.
Therefore 10 - Δ is your new standing.
Note that Connections is not used if your standings are below 0.00 (-0.01); Diplomacy is used for that, instead.
The Connections skill cannot modify your standings if you have not received any standings with a corporation or faction. In such a case your effective standings are zero regardless of your level of the Connections skill.