Virtue (德/dé) is very close to goodness (仁/rén) at the apex of Confucius’s hierarchy of values. Generally, though not always, it refers to the highest state that a ruler can aim for.
Because of the ruler’s position at the pinnacle of society, virtue acts as a form of moral power that influences the behavior of all his people in the same way that a magnet attracts metal objects. If the ruler conducts himself virtuously, the rest of the population will instinctively follow his example and act virtuously themselves. If, on other hand, the ruler conducts himself badly, the people will descend into lawlessness and depravity.
Confucius regarded the holding of solemn ritual ceremonies to commemorate the dead as one of the most important duties of a ruler and a concrete manifestation of his virtue. Indeed, he saw the failure of the rulers of the many small states that existed in China during his lifetime to adhere to this practice as one of the main reasons for the constant strife and turbulence that the country was experiencing.
Zengzi, one of Confucius’s later disciples and a fervent advocate of filial devotion, shared the view of his master. In Chapter 9 of Book 1, he even goes as far as to argue that only if a ruler showed “proper reverence” for the dead would virtue among his people reach its “highest” peak.
The nature of virtue is explored more deeply in Book 2 of the Analects. Suffice it to say for now that leadership by example is at its core.