Why does a PowerShell script not end when there is a non-zero exit code using the call operator?

The return code is not a PowerShell error - it's seen the same way as any other variable.

You need to then act on the variable and throw an error using PowerShell for you script to see it as a terminating error:

$ErrorActionPreference = "Stop"

& cmd.exe /c "exit 1"

if ($LASTEXITCODE -ne 0) { throw "Exit code is $LASTEXITCODE" }

In almost all my PowerShell scripts, I prefer to "fail fast," so I almost always have a small function that looks something like this:

function Invoke-NativeCommand() {
    # A handy way to run a command, and automatically throw an error if the
    # exit code is non-zero.

    if ($args.Count -eq 0) {
        throw "Must supply some arguments."
    }

    $command = $args[0]
    $commandArgs = @()
    if ($args.Count -gt 1) {
        $commandArgs = $args[1..($args.Count - 1)]
    }

    & $command $commandArgs
    $result = $LASTEXITCODE

    if ($result -ne 0) {
        throw "$command $commandArgs exited with code $result."
    }
}

So for your example I'd do this:

Invoke-NativeCommand cmd.exe /c "exit 1"

... and this would give me a nice PowerShell error that looks like:

cmd /c exit 1 exited with code 1.
At line:16 char:9
+         throw "$command $commandArgs exited with code $result."
+         ~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~~
    + CategoryInfo          : OperationStopped: (cmd /c exit 1 exited with code 1.:String) [], RuntimeException
    + FullyQualifiedErrorId : cmd /c exit 1 exited with code 1.