This paper points out the importance, but also the challenges of the implementation of employee share ownership plan (ESOP) in Croatian companies. This primarily through empirical research of the challenges of implementing an employee share ownership plan observed from the perspective of management, as well as employees who participate in such a plan, on the example of the Croatian company. As a context of the stated aim of the paper, it is explained what employee share ownership plan is, its models in countries key to its development, factors influencing its implementation, as well as relevant research regarding ESOP are presented. A special review is given to the European Union policy in encouraging and harmonizing employee share ownership, as well as to the legal and tax regulations in the Republic of Croatia. The findings of the empirical research indicate that the main reasons and ratio for the implementing of ESOP are the rewarding and retention of good employees in the company as well as the incentive for employees to work more and better. As key challenges by the management are recognized the legal and tax aspects and the question of how many employees will be covered by the ESOP. According to the management, ESOP has the greatest impact on the employee motivation and organizational culture, while it has the least impact on increasing the company's productivity and on the higher employee involvement in the company's decision-making process. From the employee perspective, the greatest advantages of ESOP are the more favourable tax treatment of bonus payments in shares than bonus payments in cash and the possibility of earning by selling company shares on the capital market, while respondents as the least advantage of ESOP evaluate the possibility of voting for decisions important for the company, considering that ESOP had no influence on it. Regarding the effects of the ESOP, it has the biggest influence on the participants' decision to stay working for the current company, to identify more with the company and its corporate culture and their satisfaction at work. In conclusion, the findings of this research contribute to those empirical studies proving that ESOP enhances the employee identification with the company they work for, that positively affects their motivation and commitment, as well as the decision to stay with the same company. The positive influence of the ESOP has been empirically confirmed in relation to the company's business results, while this influence is smaller on the increase in the company's productivity. As the main issue of the analysed ESOP model, this paper identifies the lack of employee involvement in the decision-making process, which was not implemented simultaneously with the ESOP, while it would strengthen the stated positive effects of the ESOP even more.