Both your follower's alignment(good, evil, neutral) and order(lawful, chaotic, apathetic) affects initiative in combat within Godwars. Every member is compared against each other so a group of 5 evil/chaotic members with a lawful/good - the evil members would still be happy but the lawful/good would be in poor shape for morale. Each party member has their own morale which affects initiative.

Morale listing from Best to Worst -

Amazing 30% or better bonus
Great 20-29%
Very Good 10-19%
Good 5-9%
Better than Average 3-4%
Average 0 to 2%
Below Average -1 to -5%
Annoyed -10 to -6%
Bad -20 to -11%
Terrible -30 to -21%
Horrible -31% or lower penalty

Morale within Arena or Dimensions are independent from each other.

Other Modifiers

By equipping an instrument as a weapon - designated with an (inst) - your other party member's morale checks will be improved by +3%.

Some classes may improve morale for a party as a special ability.