Speaking at the PWC forum, Are diversity quotas for women on boards the answer, in London, Davies (pictured) stated he is "still against quotas being introduced" and after the 25% target has been met then "companies must try and hit 40%."
Davies said the next big challenge is to tackle the FTSE350 companies' problems with diversity.
Speaking at the forum, which was chaired by business correspondent for Channel 4 Siobhan Kennedy and PwC executive board member, Margaret Cole, Davies said: "The next stage of this process is we must focus on the executive pipeline.
"A lot of multi-nationals are losing women in the pipeline because they are not providing a good work-life balance."
He added: "If we don't fix some of these issues like diversity in business, Britain is going to wake up in 15 years time with a high unemployment rate, a very disaffected youth and serious social problems."
In his speech Davies also called on senior leaders to have a "greater understanding" of diversity in their organisation. He said: "Until you understand the different faiths and cultures among your employees, you can never truly call yourself a great manager."
The forum coincided with tomorrow's release of a PwC report, which will show the UK's ranking on five key indicators of female economic empowerment.
