The Shinra were acting in the best interests of their company's survival and profitability. Part of the company's survival depended on removing threats such as Weapon. Part of the company's survival depended on nullifying Cloud's party, since they acted in opposition to Shinra. I think the means taken to achieve their ends is what is troubling.

It's an interesting power triangle; one between Shinra, Cloud, and Sephiroth, where all three have the capacity to take control. One could easily see it being resolved in a number of different ways. Then there are the bit players - Hojo is a great example. *shivers as he realizes how awesome FFVII is, dammit*