Morale is a measure of a character's behavior/mood in the game 60 Parsecs! It increases when the crew is kept in good health and when good choices are made by the captain. It decreases when bad choices are made and when the captain doesn't help the crew when they are sick, starving, insane, or injured.
If a character has a loyal/friend morale status he/she will noticably look happier and much more lively. They will also complete cooperative events to the best of their ability. Though, if they have an insubordinate or enemy status they will look angry and spiteful towards the player. As opposed to the friendly status, they will carelessly fail cooperative events if they are chosen to participate. If the character becomes insubordinate, they will no longer produce minerals or power.
Insubordinate characters cannot be sent out on expeditions. If they remain insubordinate for too long, they can become traitors and kick the captain out of the shuttle, giving the player an instant game over. The character can even challenge the captain on some occasions, usually forcing the player to choose between choices that would be feeble against them.
Very rare traitor events can occur either after sending a crewmate out on an expedition, or at random in the shuttle. In one, the crewmate can return to the shuttle as an android traitor - which will cause a specific decision event to trigger. The character will appear almost the same, but have his/her face ripped off, revealing his/her true robotic form underneath. You can use various items in the shuttle to fight back, but if you fail, it is an instant game over.
In another rare situation, they can become alien traitors. Unlike androids, they usually don't give any hints to their schemes until their appearance changes. When it does, they will appear crazed and frazzled, with an alien-held device set in their lap and wires plugged into their head.
Mind-controlled by the small organism, they will attempt to override the system's memory storage. A decision event will pop up, and the player will be forced to choose how to stop them. If you succeed, the alien will get killed and the character will return to normal. If you fail, you and the rest of the crew will become mind-controlled as well, resulting in an anti-climatic game over.
Yet another traitorous event can cause one of your crewmates to become a communist traitor. They will suddenly appear insubordinate, and wear a ushanka hat on their head. Like an android and alien traitor, the character will try to sabotage the space shuttle and the captain will be forced to use various supplies to fight back.
Characters who are loyal and friends with the player can occasionally cause bonding events to occur. If you make the right decision with each one that appears, it is possible to become soul mates with them. Being soulmates can cause even more bonding events to appear and gives the player a chance to learn more about the desired crewmate.
If you cheat on your soulmate with another character, they will become insubordinate for a certain amount of time, but that's about it.
There is a completely different morale status that can happen if the player frightens the crew during a mutiny. In order to trigger a mutiny, the captain will need to be well-fed while the others are starving. Then, the next day - feed everyone.
(Note that this event doesn't appear with only one companion, you are required to have two or more.)
Afterwards, the mutiny event will occur, and you will have to choose wheither to fight back against your crew or not. Doing nothing will allow your crew calm down and go back to normal, while using an item will result in a game over.
The following day, you may or may not get another decision event of deciding which crewmate to kick out to "set an example of." Doing this will result in the selected crewmate to be killed, and the others to have the new trait called "Afraid."
Notably, Afraid characters' sprites will not change, unlike the rest of the statuses. You cannot send Afraid characters out on expeditions. Since it usually happens after the mutiny event, it's most likely a second chance for the captain to maintain the character's morale.
(Note that there might be a bug where a character is a friend and an enemy at the same time, which means they wont be sent out on expeditions)