It's all in the definition
Alignment can be a touchy subject in a campaign, not because of any inherent controversy, but because it can be more of a limitation than an asset. Alignment is a frequent component in many games, and you should ignore it if it causes problems, but if used properly, it can help you shape the attitudes and behaviours of NPCs, peoples, and entire regions.
To be a useful game mechanic, alignment ought to be more objective than subjective. Once you start parsing terms in the "grey areas," you're courting exceptions that players can't rely on. In turn, once PCs see the inconsistency, they'll have justifiable latitude in redefining their alignment to suit their actions.
In my quest for objectivity, I like to use a simple set of alignment options; the "original" Lawful, Neutral, Chaotic axis from D&D of old is a good start, but I've tweaked the definitions a bit to reduce subjectivity:
- Lawful: Mindful that the needs of the many outweigh the needs of the few; capable of self-serving acts, but not at the expense of others in need.
- Neutral: Generally self-serving, but selectively compassionate and willing to address the needs of certain groups.
- Chaotic: Always self-serving and indifferent to the needs of others; capable of Lawful acts, but only to further their personal agenda.
Note that I've avoided the "Good vs. Evil" aspect, which seems to be where most alignment issues originate. No one defines themselves as "evil." Instead, everyone views their actions as good, with the possible realisation that what's good for them may not be good for others. This shifts alignment from a measure of "goodness" to a measure of altruism.
Alignment is not a boundary into which behaviour must be constrained. Instead, it is an indicator that helps steer (but not predict) the actions of characters (or governments or corporations or factions). Alignment points to likely—but not definite—responses to a given situation. Alignment as a total world view is a convenient application, but almost never realistic or practical in all situations.
To illustrate this point, consider modern political leanings. An individual might define himself as conservative, and this outlook certainly guides his beliefs across a spectrum of issues. But it’s a rare individual who’s equally conservative about everything; this person probably sees some issues in more moderate, or even liberal, terms. As in the real world, there are too many variables, mitigating circumstances, and personal factors at play for someone to confine themselves—without exception—to the far right, the far left, or the absolute middle in all matters.
Applying the Concept
Casting alignment as a measure of selflessness and self-sacrifice, you can mentally divide the focus of an individual's altruism. For Lawful characters, others come first. For Chaotic characters, self comes first. For Neutral characters, self comes first most of the time, but certain others are worth time and effort.
But it's important to note that these behaviours aren't absolute. Lawful characters are capable of self-serving acts, provided that they believe they'll be of benefit to others. For example, a Lawful character might refuse to donate a holy relic to a church if he believes he can make better use of it himself. Similarly, a Chaotic character may commit apparently selfless acts, but only in the pursuit of their own agenda; any benefit to others is an unintended consequence. Neutral characters aren't "middle of the road" folks; instead, they're pretty much out for themselves, but there are groups, causes, organisations, and people whom they respect, admire, and want to support—for these, a Neutral does what he can.
Please consider this as food for thought. While I've attempted to scrub a lot of subjectivity out of alignment in my campaign, there will always be questionable situations. The key to resolving these is to consider how the character's alignment influences the character's decision, at the time, given the information at hand and his current agenda.
If you include alignment in your campaign, use it as a guideline for behaviour, but take care that it doesn’t contradict a character’s realistic pursuit of his goals, best interests, or alternating senses of duty and self-preservation. While alignment is a good basis for predicting a character’s response to events, it should never be followed slavishly. Concomitantly, characters should never be penalised for acting “out of alignment” if game situations make it clear that doing so is impractical, unrealistic, or unnecessarily self-destructive.