For the past 3 battles where my character on a test island lost 4 - 0 - 9 men, his unit lost 2 - 16 - 4.
However, the unit retreated all three times.
Another character's unit on EC lost 10 morale while losing 0 man. The unit did not retreat and it won the battle.
Will definitely need more data but I don't think there is any good logic behind the morale gain/loss at the moment. So far, just losses and the result of battle doesn't seem to affect it that much.