Structured Moral Reasoning in Language Models: A Value-Grounded Evaluation Framework

Abstract: LLMs are increasingly deployed in domains requiring moral understanding, yet their reasoning often remains shallow, and misaligned with human reasoning. Unlike humans, whose moral reasoning integrates contextual trade-offs, value systems, and ethical theories, LLMs often rely on surface patterns, leading to biased decisions in morally and ethically complex scenarios. To address this gap, we present a value-grounded framework for evaluating and distilling structured moral reasoning in LLMs. We benchmark 12 open-source models across four moral datasets using a taxonomy of prompts grounded in value systems, ethical theories, and cognitive reasoning strategies. Our evaluation is guided by four questions: (1) Does reasoning improve LLM decision-making over direct prompting? (2) Which types of value/ethical frameworks most effectively guide LLM reasoning? (3) Which cognitive reasoning strategies lead to better moral performance? (4) Can small-sized LLMs acquire moral competence through distillation? We find that prompting with explicit moral structure consistently improves accuracy and coherence, with first-principles reasoning and Schwartz's + care-ethics scaffolds yielding the strongest gains. Furthermore, our supervised distillation approach transfers moral competence from large to small models without additional inference cost. Together, our results offer a scalable path toward interpretable and value-grounded models.