Kripke and Putnam's argument concerns our definitions of certain substances, say, "water," "gold," and "tiger." The basic idea of direct reference is that "water" does not have a descriptive meaning that we could find in a dictionary and carry around in our heads. Instead, it should be defined as "stuff like that," "tiger" is defined as "creatures like that," and so on, where in each case the word "that" is used to point to real objects.
This is where the theory of exemplars comes back in. Using the same model, the argument is that moral exemplars are persons like that. We point directly to exemplars of goodness like Confucius, Socrates, Jesus, or whoever else. We pick them out through admiration, not by applying a descriptive concept in our heads. We then find out what makes them admirable by observation, just as we find out what makes water the substance that it is by observation.