Sephiroth wasn't so much a bad villain (The death of Shinra and the Midgar Zoram at the games beginning did a good job to set him up as threatening, for example), it's just he wasn't a great one, and is pretty outclassed in terms of awesome villainy by Shin-ra and Hojo. Not entirely sure they should be separate entities, but I can understand the distinction.

Hojo takes it for me, even though his going away at games end just came out of left field and felt completely out of character for the guy we'd scene up until now.

Shinra also has a strong presence everywhere you go in the game. No matter where you are, Shinra has it's slimy little hands there. Messing with stuff. And not even because you are there. It's just what they do.

Now, in this regard they don't' do quite as well as, say, Breath of Fire II did, but still it was handled well enough.