I think it would be awesome if in combat, when a goblin is low health, he surrendered and there is an option to capture him. In order to capture a goblin you would need to create a jail/dungeon zone. Once a goblin is captured, he is taken to that zone (probably an enclosed jail) and waits for 3 days. It would be dark but funny if you could have them executed. After the 3 days the goblin is a functioning member of society, is able to be named, and used as a laborer or soldier (100% not slavery)
I think it will be good if somebody creates a mod for this. And I have suggestion that it will be good if there was new job for this like jailor. He could craft cages and gallows but I think I’m turning here to the dark side.
I personally would prefer a viable way to have friendly Goblins and Orcs, as well as any other sentient race as a member of your town. And those different races would have different likes/dislikes.
For instance Goblins would perhaps LIKE cramped spaces, but dislikes lots of lights. Another example would be the rabbit clan race preferring raw vegetables over cooked ones.
Execution sounds cool, but would totally deviate the game from its child-friendly course and it should have some factor to it (you dont capture an enemy to later execute him “just for fun”). What I mean is that it should be worth it to execute (maybe boost the town`s morale, or make goblins aferaid of you on the next fight)
Having a goblin citizen is a good idea, because you need no food nor net worth to get him, but in order to not no be TOO OP, here are a list of things that could be useful to kinda nerf those odds:
-The goblin must be treated by the herbalist, starts having contact with humans
-Give him time (a day or two) so poeple can socialize with him in his cell
-Once the goblin is integrated in society, he can´t be a crafter nor a fighter, just a worker
-If the goblin gets knocked out by any other goblin, he turns hostile again.
And I have suggestion that it will be good if there was new job for this like jailor. 
He could craft cages and gallows but I think I’m turning here to the dark side. 