Our blanket rule is that everyone has their own standards and are strictly allowed to observe them. If we find ourselves without enough "yesses" to do a project, we do it.
We have had this discussion a lot. We had a potential client which was an enterprise of someone who had been very important and visible in the fight against gay marriage. The enterprise itself was not associated with their political work but it made the team feel that they just wouldn’t be excited to support the enterprise. We opted out of that one.
We had a client once who wanted us to do a user-submitted porn page on their site. We had the discussion and were split on who would be OK doing it. We had enough who were comfortable that we could do it. They ended up not moving forward with it anyway, but the process worked well in that case.
These decisions can be public if people want them to be, or can be private and expressed/summarized through a manager. It’s good to have a healthy discussion and debate if we can and people feel strongly about it one way or the other.
What I used to say is "We wouldn’t work for Al Qaeda and we would definitely work for Unicef. So the line is somewhere in the middle there"